Filed Pursuant to Rule 424(b)(1)
Registration No. 333-227608

6,666,667 Shares

Common Stock

This is an initial public offering of shares of common stock of NGM Biopharmaceuticals, Inc. All of the 6,666,667 shares of common stock are being sold by us.

Prior to this offering, there has been no public market for our common stock. The initial public offering price per share is $16.00.

Our common stock has been approved for listing on the Nasdaq Global Select Market under the symbol “NGM.”

We are an “emerging growth company” as defined under the federal securities laws and, as such, have elected to comply with certain reduced public company reporting requirements.

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 12 to read about factors you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

We have granted the underwriters an option to purchase up to an additional 1,000,000 shares at the initial public offering price less the underwriting discounts and commissions.

Merck Sharp & Dohme Corp., a strategic collaborator and existing stockholder, has agreed to purchase 4,121,683 shares of our common stock in a separate private placement concurrent with the completion of this offering at a price of $16.00 per share. The sale of such shares will not be registered under the Securities Act of 1933, as amended. The completion of this offering is not contingent upon the completion of such concurrent private placement.

In addition, entities affiliated with The Column Group, an existing stockholder, have agreed to purchase 1,875,000 shares of our common stock in this offering at the initial public offering price. The underwriters will receive the same underwriting discount on any shares purchased by these entities as they will on any other shares sold to the public in this offering.

The underwriters expect to deliver the shares against payment in New York, New York on April 8, 2019.

Prospectus dated April 3, 2019

TABLE OF CONTENTS

We have not authorized anyone to provide you with any information other than the information contained in this prospectus or any free writing prospectus we have prepared. We take no responsibility for, and provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only in circumstances and in jurisdictions where it is lawful to so do. The information contained in this prospectus is accurate only as of its date, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourself about, and to observe any restrictions relating to, this offering and the distribution of this prospectus.

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RISK FACTORS

Investment in our common stock involves a high degree of risk and uncertainty. You should carefully consider each of the risks and uncertainties described below before you decide to buy our common stock. You should also refer to the other information in this prospectus, including our consolidated financial statements and related notes. If any of the following risks and uncertainties materialize, our business, financial condition, liquidity and results of operations could be materially and adversely affected. This could cause the trading price of our common stock to decline, and you could lose all or part of your investment.

Risks Related to Our Financial Results and Capital Needs

We have incurred net losses every year since our inception, expect to incur significant and increasing operating losses and may never be profitable. Our stock is a highly speculative investment.

We are a clinical-stage biopharmaceutical company that was incorporated in December 2007 and commenced operations in early 2008. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect and/or an acceptable safety profile, gain regulatory approval and become commercially viable. We have no products approved for commercial sale and have not generated any revenue from product sales to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred losses in each period since commencing operations in early 2008. Our net loss was $14.2 million and $0.5 million for the years ended December 31, 2017 and 2018, respectively. As of December 31, 2018, we had an accumulated deficit of $147.2 million.

We have spent, and expect to continue to spend, significant resources to fund research and development of, and seek regulatory approvals for, our product candidates. We expect to incur substantial and increasing operating losses over the next several years as our research, development, preclinical testing and clinical trial activities increase. As a result, our accumulated deficit will also increase significantly. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue beyond those generated pursuant to the Merck collaboration. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital. Even if we eventually generate product revenue, we may never be profitable and, if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Substantially all of our revenue for recent periods has been received from a single collaboration partner.

During the past two years, substantially all of our revenue was from our collaboration partner, Merck. We will require substantial additional capital to achieve our development and commercialization goals for NGM282, for any Merck licensed programs that we opt to co-develop and for any programs that Merck does not opt to develop and that we choose to develop, such as NGM386 and/or NGM395, for which Merck has given us notice of its intent to terminate the license and that we are considering whether to advance pending study results. Under the Merck collaboration, Merck provides us with reimbursement for research and development activities of at least $50 million per year, plus additional amounts up to agreed upon annual caps, if certain conditions are met; however, we may require additional funding to advance our research and development affairs on our planned timeline, or at all. If

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our Merck collaboration were to be terminated, or if the annual cap under the Merck collaboration is insufficient, we could require significant additional capital in order to proceed with development and commercialization of our product candidates, or we may require additional partnering in order to help fund such development and commercialization. Merck has exercised its option to extend the research and early development program through March 17, 2022 and has the right to extend it again through March 17, 2024. If adequate funds or partners are not available to us on a timely basis, on favorable terms or at all, we may be required to delay, limit, reduce or terminate our research and development efforts or other operations. See “Business—Our Collaboration with Merck.”

We currently have no source of product revenue and may never become profitable.

Our product candidates are in the early stages of development. To date, we have not generated any revenue from commercialization of our product candidates. We will not be able to generate product revenue unless and until one of our product candidates, alone or with our partners, successfully completes clinical trials, receives regulatory approval and is successfully commercialized. As our product candidates are in early stages of development, we do not expect to receive revenue from those product candidates for a number of years, if ever. We may seek to obtain revenue from collaboration or licensing agreements with third parties. Other than our agreement with Merck, we currently have no such agreements that could provide us with material, ongoing future revenue and we may never enter into any such agreements. Our ability to generate future product revenue from our current or future product candidates also depends on a number of additional factors, including our or our current and future partners’ ability to:

In addition, because of the numerous risks and uncertainties associated with pharmaceutical product development, including that our product candidates may not advance through development or achieve the endpoints of applicable clinical trials, we are unable to predict the timing or amount of increased expenses, or if or when we will achieve or maintain profitability. In addition, our expenses could increase beyond expectations if we decide, or are required by the FDA or foreign regulatory authorities, to perform studies or trials in addition to those that we currently anticipate. Even if we complete the development and regulatory processes described above, we anticipate incurring significant costs associated with launching and commercializing these products.

Even if we generate revenue from the sale of any of our products that may be approved, we may not become profitable and may need to obtain additional funding to continue operations. If we fail to

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become profitable or do not sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations.

We may require additional capital to finance our operations, which may not be available to us on acceptable terms, or at all. As a result, we may not complete the development and commercialization of our product candidates or develop new product candidates.

As a research and development company, our operations have consumed substantial amounts of cash since inception. We expect our research and development expenses to increase substantially in connection with our ongoing activities, particularly to the extent that product candidates whose costs are not borne by our collaborator, such as NGM282, NGM386 and NGM395, advance in clinical development. We believe that the net proceeds from this offering and the concurrent private placement to Merck, together with our existing cash, cash equivalents and short-term marketable securities and funding we expect to receive under our existing collaboration agreement, will fund our projected operating requirements for at least the next twelve months. Our forecast of the period of time through which our financial resources will adequately support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this “Risk Factors” section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements, both short and long-term, will depend on many factors, including:

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Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies.

Unless and until we can generate a sufficient amount of revenue from our products, we will require additional capital to discover, develop, obtain regulatory approval for and commercialize our current and future product candidates. We do not have any committed external source of funds, other than pursuant to our collaboration with Merck, which is limited in scope and duration, and may be terminated in certain circumstances. We expect to finance future cash needs through public or private equity or debt offerings or product collaborations. Additional capital may not be available in sufficient amounts or on reasonable terms, if at all. Our existing stockholders could suffer dilution or be negatively affected by fixed payment obligations we may incur if we raise additional funds through the issuance of additional equity securities or debt. Furthermore, these securities may have rights senior to those of our common stock and could contain covenants or protective rights that would restrict 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. If we need to secure additional financing, such additional fundraising efforts may divert our management and research efforts from our day-to-day activities, which may adversely affect our ability to develop and commercialize future product candidates. If we do not raise additional capital, we may not be able to expand our operations or otherwise capitalize on our business opportunities, our business and financial condition will be negatively impacted and we may need to:

If we need to conduct additional fundraising activities, but are unable to do so, we may be prevented from pursuing development and commercialization efforts, which will have a material adverse effect on our business, operating results and prospects.

To the extent we obtain additional funding through product collaborations, these arrangements would generally require us to relinquish rights to some of our technologies, product candidates or products, and we may not be able to enter into such agreements, on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our development programs or product candidates.

We plan to use current year operating losses and our federal and state net operating loss, or NOL, carryforwards to offset taxable income from revenue generated from operations including corporate collaborations. However, our ability to use NOL carryforwards could be limited.

We plan to use our current year operating losses to offset taxable income from any revenue generated from operations, including corporate collaborations. To the extent that our taxable income exceeds any current year operating losses, we plan to use our NOL carryforwards to offset income that would otherwise be taxable. However, under Section 382 of the U.S. Internal Revenue Code of 1986, as amended, the amount of benefits from our NOL carryforwards may be impaired or limited if we incur a cumulative ownership change of more than 50%, as interpreted by the U.S. Internal Revenue Service, over a three-year period. We may have experienced ownership changes in the past and may experience ownership changes in the future as a result of this offering and subsequent shifts in our

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stock ownership, some of which are outside our control. As a result, our use of federal NOL carryforwards could be limited. State NOL carryforwards may be similarly limited. Any such disallowances may result in greater tax liabilities than we would incur in the absence of such a limitation and any increased liabilities could adversely affect our business, results of operations, financial position and cash flows.

Risks Related to Our Business and Industry

Our product candidates must undergo rigorous clinical trials and regulatory approvals, which could delay or prevent commercialization of our product candidates.

All of our product candidates will be subject to rigorous and extensive clinical trials and extensive regulatory approval processes implemented by the FDA and similar regulatory bodies in other countries. The approval process is typically lengthy and expensive, and approval is never certain. We or our collaborator, if any, may delay, suspend or terminate clinical trials at any time for reasons including:

Positive or timely results from preclinical studies and early clinical trials do not ensure positive or timely results in late-stage clinical trials or product approval by the FDA or any other regulatory authority. Product candidates that show positive preclinical or early clinical results often fail in later stage clinical trials. Data obtained from preclinical and clinical activities is susceptible to varying interpretations, which could delay, limit or prevent regulatory approvals.

We have no experience in conducting the late-stage clinical trials required to obtain regulatory approval. We may not be able to conduct clinical trials at preferred sites, enlist clinical investigators, enroll sufficient numbers of participants or begin or successfully complete clinical trials in a timely fashion, if at all. Our current clinical trials may be insufficient to demonstrate that our potential products

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will be active, safe or effective. Additional clinical trials may be required if clinical trial results are negative or inconclusive, which will require us to incur additional costs and significant delays. If we do not receive the necessary regulatory approvals, we will not be able to generate product revenue and may not become profitable.

If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

Before obtaining marketing approval from regulatory authorities for the sale of future 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, will take several years to complete and may not yield results that support further clinical development or product approvals. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical studies and early clinical trials may not predict the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety profiles, notwithstanding promising results in earlier trials.

To date, the data supporting our drug discovery and development programs are derived from laboratory and preclinical studies and earlier-stage clinical trials. Despite the results reported in our Phase 1 and 2 clinical trials for NGM282, in Phase 1 clinical trials for NGM313 and in preclinical studies for our other product candidates, 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. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive regulatory approval. Owing in part to the complexity of biological pathways, these compounds might not demonstrate in patients 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.

Further, we expect that 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 acceptable to the FDA in our trials. 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 our product treatments and the average exposure time in the 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 greater periods of time.

If we are unable to successfully discover, develop or enable our partners to develop drugs that are effective and safe in humans, we will not have a viable business.

The Phase 2 clinical trial of NGM282 that has produced NASH histology data is ongoing, and the clinical data produced to date is preliminary and has not been subjected to quality control procedures.

We have an ongoing, Phase 2 clinical trial of NGM282 in NASH. Until the final cohort of the NGM282 Phase 2 clinical trial is completed, we are unable to perform typical quality control procedures

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on the data produced in this trial to ensure its accuracy. While we believe the data available to date is accurate, until such time as the final quality control procedures are performed it should be regarded as preliminary. Differences between preliminary data and final data may lead us to make different operational decisions regarding or incur additional expenses for the development of NGM282 than we otherwise would if final data was available. Additionally, our business and prospects depend on the development of this program, and if final data is less promising than the preliminary data suggests, our business and prospects could be adversely affected.

Success in preclinical studies or earlier-stage clinical trials may not be indicative of results in future clinical trials.

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. Frequently, product candidates that have shown promising results in early clinical trials have subsequently suffered significant setbacks in later clinical trials. To date, some of our clinical trials have involved small patient populations and, because of the small sample size in such trials, 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. In addition, 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. 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, the outcome of preclinical studies may not predict the success of clinical trials. Moreover, data obtained from preclinical and clinical activities is subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, we may experience regulatory delays or rejections as a result of many factors, including due to changes in regulatory policy during the period of our product candidate development. Any such delays could negatively impact our business, financial condition, results of operations and prospects.

If we experience delays in clinical testing, we will be delayed in commercializing our product candidates, our costs may increase and our business may be harmed.

Conducting clinical studies for any of our drug candidates for approval in the United States requires filing an IND application and reaching agreement with the FDA on clinical protocols, finding appropriate clinical sites and clinical investigators, securing approvals for such studies from the institutional review board at each such site, manufacturing clinical quantities of drug candidates and supplying drug product to clinical sites. Currently, we have multiple active INDs with the FDA in the United States, including for NGM282 for NASH and PBC, an active Clinical Trials Notification, or CTN, in Australia for NGM120 and an active Clinical Trial Authorisation in the United Kingdom from the Medicines and Healthcare Products Regulatory Agency for NGM217 for diabetes.

We cannot guarantee that we will be able to successfully accomplish required regulatory activities or all of the other activities necessary to initiate and complete clinical trials. 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. We do not know whether any other 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 experience delays in clinical testing. Significant clinical trial delays also could 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

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do, which would impair our ability to successfully commercialize our product candidates and may harm our business, results of operations and prospects. Events that may result in a delay or unsuccessful completion of clinical development include:

Our or our partners’ inability to timely complete clinical development could result in additional costs to us or impair our ability to generate product revenue or development, regulatory, commercialization and sales milestone payments and royalties on product sales.

If we or our partners are unable to enroll patients in clinical trials, we will be unable to complete these trials on a timely basis.

The timely completion of clinical trials largely depends on patient enrollment. Many factors affect patient enrollment, including:

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In particular, there is significant competition for recruiting NASH patients in clinical trials, and we or our partners may be unable to enroll the patients we need to complete clinical trials on a timely basis, or at all.

We may not successfully identify, develop or commercialize potential product candidates.

The success of our business depends primarily upon our ability to identify and validate new therapeutic candidates, and to identify, develop and commercialize protein and antibody therapeutics. Our research efforts may initially show promise in discovering potential new protein and antibody therapeutics, yet fail to yield product candidates for clinical development for a number of reasons, including:

If any of these events occur, we may be forced to abandon our development efforts for one or more programs, which could have a material adverse effect on our business, operating results and prospects and could potentially cause us to cease operations. Research programs to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.

We are subject to many manufacturing risks, any of which could substantially increase our costs and limit supply of our products.

To date, our product candidates have been manufactured by third-party manufacturers solely for preclinical studies and clinical trials. These manufacturers may not be able to scale production to the larger quantities required for large clinical trials and to commercialize our product candidates. We have entered into a Development and Manufacturing Services Agreement with Lonza Ltd. for the production

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of Phase 3 and commercial supplies of NGM282. The process of manufacturing our products is complex, highly regulated and subject to several risks, including:

Certain raw materials necessary for the manufacture of our product candidates under our current manufacturing process, such as reagents that support cell growth, are available only from a single supplier and have been purchased without a long-term supply agreement. For example, we have a non-exclusive license from Lonza Sales AG to use its glutamine synthetase gene expression system, available only from Lonza Sales AG, to manufacture and commercialize our proprietary products, including our product candidates that are currently subject to our collaboration with Merck. See the section titled “Business—Intellectual Property—Licensing Arrangements” for more information regarding this agreement. We do not have agreements in place that guarantee our supply or the price of these raw materials. Any significant delay in the acquisition or decrease in the availability of these raw materials could considerably delay the manufacture of our product candidates, which could adversely impact the timing of any planned trials or the regulatory approvals of our product candidates.

The manufacture of biologic products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of biologic products often encounter difficulties in production, particularly in scaling up and validating initial production and ensuring the avoidance of contamination. These problems include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing, operator error and shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. We cannot assure you that any stability or other issues relating to the manufacture of our product candidates will not occur in the future.

We have limited process development capabilities and have access only to external 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 human clinical trials or commercialization. Any delay or interruption in the supply of clinical trial materials could delay the completion of 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 or terminate clinical trials completely.

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Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval or limit the commercial profile of an approved label.

Undesirable side effects caused by our product candidates could cause us or regulatory 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 regulatory authorities. Additional clinical studies may be required to evaluate the safety profile of our product candidates. The following serious adverse events were reported in our Phase 1 and five Phase 2 clinical trials of NGM282: moderate dizziness, community acquired pneumonia, iron deficiency anemia, fractured finger, pneumonitis/alveolitis, acute pancreatitis, pneumonia, pleurisy, non-myocardial infarction cardiac arrest, chest pain, vertigo, headache, accelerated hypertension, kidney mass, bowel obstruction, bilirubin increase, cholangitis, progression of PSC and intervertebral discitis. Preliminary reporting from our completed Phase 1 and Phase 1b clinical trials of NGM313 showed that there were no reported serious adverse events except for a single incident each of cholecystitis and rectal bleeding due to hemorrhoids, both of which were deemed by the investigators to be unrelated to treatment with NGM313.

Significant increases in serum levels of low density lipoprotein, or LDL, cholesterol were observed in clinical trials of NGM282 in NASH and type 2 diabetes. The drug-induced changes in LDL cholesterol were brought back to baseline levels with concomitant statin use in NASH patients, however, sustained LDL cholesterol elevations in untreated patients can be associated with cardiovascular disease. While the impact of these drug-induced changes in cholesterol are unknown, we believe that concomitant statin use, along with NGM282’s triglyceride lowering and high density lipoprotein, or HDL, cholesterol elevating properties, will provide an overall neutral to positive impact on patients’ cardiovascular health. We have not observed any significant changes in LDL cholesterol with NGM282 in trials we have conducted in patients with cholestatic liver disease, such as primary biliary cholangitis and primary sclerosing cholangitis.

One subject in the NGM282 Phase 2a clinical trial in type 2 diabetes developed antibodies against NGM282 that appear to cross-react with FGF19. This patient did not demonstrate any biochemical or clinical safety concerns while in the study, and we have not identified any safety concerns while monitoring the subject following the study. Six of the 36 subjects in the NGM282 Phase 2 extension clinical trial in PBC were confirmed to have antibodies against NGM282. These subjects have not demonstrated any biochemical or clinical safety signals that were different from observations in subjects that did not generate antibodies against NGM282. However, future results of our trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. In such an event, we could suspend or terminate our trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications. Drug-related side effects could affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Any of these occurrences could materially and adversely affect our business, financial condition and prospects.

Our most advanced clinical-stage product candidate, NGM282, is a modified version of a human hormone that has been associated with liver cancer in rodent testing.

NGM282 is a modified version of FGF19, a human hormone that has been associated with liver cancer in rodent testing. The IND that we filed 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 NGM282 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 NGM282 in type 2 diabetes after we analyzed the results of the Phase 2a clinical trial of NGM282 in type 2 diabetes and made the determination to pursue NASH and

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other liver indications. To date, the FDA Division of Gastroenterology and Inborn Errors Products, which is responsible for the NASH indication, has not requested any additional information regarding the potential for NGM282 to induce hepatocellular proliferation. We have received feedback from the FDA Carcinogenicity Assessment Committee, or CAC, 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 mouse ortholog for FGF19 share a sequence identity of approximately 50%, which means that the results of these studies of NGM282 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 NGM282 has ever been tested in humans. We believe we have identified a modified version of FGF19 that does not exhibit the cancer causing effects of native FGF19 in rodents. We believe that NGM282 will have a superior therapeutic profile to FGF19 based on preclinical data showing reduced fasting blood glucose levels, fed insulin levels and bile acid suppression in animals. However, we may be incorrect in these beliefs, and we cannot be sure that regulators will view our product candidate as safe or that physicians will view our product candidates as superior to alternative treatments. Concerns about the association between FGF19 and liver cancer could have an adverse effect on our ability to develop and commercialize NGM282.

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, we must either develop our own sales, marketing and distribution capabilities, which will be expensive and time consuming, or make arrangements with third parties to perform these services for us. If we exercise our co-detailing rights in the United States with respect to the Merck collaboration, we will be responsible for the costs of fielding such a sales force, subject to 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 and financial condition.

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 research and development, management and financial resources toward particular product candidates or therapeutic areas may not lead to the development of viable commercial products and may divert resources from better opportunities. Similarly, our decisions to delay or terminate drug development programs may also be incorrect and could cause us to miss valuable opportunities.

Under our 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

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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 sharing 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 Dr. Jin-Long Chen, and our scientific advisors or continue to attract and retain qualified scientific, technical and business personnel, our business will suffer. The departure of Dr. Chen within the next several years would permit Merck to shift the focus under our collaboration agreement to concentrate on the development of later-stage product candidates.

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. We are dependent on the members of our management team and our scientific advisors for our business success. An important element of our strategy is to take advantage of the research and development expertise of our current management and to utilize the expertise of our scientific advisors in the cardio-metabolic, liver, oncologic and ophthalmic disease fields. We currently have employment letter agreements with all of our executive officers. Our employment agreements with our executive officers are terminable by them without notice and some provide for severance and change in control benefits. See the section titled “Executive and Director Compensation—Other Elements of Compensation—Agreements with our Named Executive Officers” and “Executive and Director Compensation—Other Elements of Compensation—Potential Payments Upon Termination or Change of Control” for further discussion. The loss of any one of our executive officers or key scientific consultants, 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. During the initial term of the Merck collaboration, the departure of Dr. Chen as our employee or director of our research (other than on account of his employment by Merck) would give Merck the right to shift the focus of its research and development funding to concentrate on the development of later-stage product candidates, but Merck would not have the right to terminate or otherwise alter the conduct of the collaboration.

To fully realize the research and development support committed under our collaboration with Merck, we will need to maintain a significant number of qualified research and development, scientific, administrative and commercial personnel. There is intense competition for qualified personnel, including management in the technical fields in which we operate, and we may not be able to attract and retain qualified personnel necessary for the successful research, development and commercialization of our product candidates. In particular, we have experienced a very competitive hiring environment in the San Francisco Bay Area, where we are headquartered. 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. If we are unable to continue to attract and retain high-quality personnel, the rate and success with which we can discover and develop product candidates and our business will be limited.

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Disputes under key agreements or conflicts of interest with our scientific advisors or clinical investigators could delay or prevent development or commercialization of our product candidates.

Any agreements we have or may enter into with third parties, such as collaboration, license, formulation supplier, manufacturing, clinical research organization or clinical trial agreements, 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 research and development, the approach for regulatory approvals or commercialization strategy. We intend to conduct research programs in a range of therapeutic areas, but 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 litigation.

We work with outside scientific advisors and collaborators at academic and other institutions that assist us in our research and development efforts. Our scientific advisors are not our employees and may have other commitments that limit their availability to us. If a conflict of interest between their work for us and their work for another entity arises, we may lose their services.

We may encounter difficulties in managing our growth, which could adversely affect our operations.

Since executing the Merck agreement in 2015, we have significantly increased our headcount and advanced our pipeline and the complexity of our operations, which has placed a strain on our administrative and operational infrastructure. We expect this strain to continue as we maintain our growth and seek to obtain and manage relationships with third parties. Our ability to manage our operations and growth effectively depends upon the continual improvement of our procedures, reporting systems and operational, financial and management controls. We may not be able to expand or identify sufficiently-sized facilities to accommodate our growth, particularly given our location in South San Francisco, California and the current high demand for and restricted supply of research and development facilities in this market. We may not be able to implement administrative and operational improvements in an efficient or timely manner and may discover deficiencies in existing systems and controls. If we do not meet these challenges, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures, which in turn may slow our growth or give rise to inefficiencies that would increase our losses.

We may acquire additional technology and complementary businesses in the future. Acquisitions involve many risks, any of which could materially harm our business, including the diversion of management’s attention from core business concerns, failure to effectively exploit acquired technologies, failure to successfully integrate the acquired business or realize expected synergies or the loss of key employees from either our business or the acquired businesses.

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 companies, including AbbVie, Allergan, AstraZeneca/MedImmune, Bayer, Bristol-Myers Squibb, Eisai,

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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, Amgen, Can-Fite, Cirius, Conatus, CymaBay, Enanta, Galectin, Galmed, Genfit, Gilead, Intercept, Inventiva, Madrigal, MannKind, MediciNova, Metacrine, Nalpropion, Terns, Viking, Vivus and Zafgen, are pursuing the development or marketing of pharmaceuticals that target the same diseases that are targeted by our most advanced product candidates. It is probable that the number of companies seeking to develop products and therapies for the treatment of cardio-metabolic disorders, liver, oncologic and ophthalmic 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 testing and human clinical studies 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. Many of our competitors have established distribution channels for the commercialization of their products, whereas we have no such channel or capabilities. In addition, many competitors have greater name recognition and more extensive collaborative relationships. Smaller and earlier-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies.

Our competitors may obtain regulatory approval of their products more rapidly than us or may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates. Our competitors may also develop drugs that are more effective, more convenient, more widely used and less costly or have a better safety profile than our products and these competitors may also be more successful than us in manufacturing and marketing their products. If we are unable to compete effectively against these companies, then we may not be able to commercialize our product candidates or achieve a competitive position in the market. This would adversely affect our ability to generate revenue. Our competitors 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.

There are no currently approved therapies for NASH. Although we believe there are no 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, 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.

If NGM282 or NGM313 were approved for the treatment of NASH, future competition could also arise from products currently in development, including: cenicriviroc, an immunomodulator that blocks CCR2 and CCR5 from Allergan; GS-0976, an ACC inhibitor, GS-9674, an FXR agonist, and selonsertib, an ASK1 inhibitor, from Gilead; OCA, an FXR agonist, from Intercept; MGL-3196, a beta-thyroid hormone receptor agonist from Madrigal; pegbelfermin, PEGylated FGF21, from Bristol-Myers Squibb; elobixibat, an IBAT-inhibitor from Albireo; a Galectin-3 inhibitor from Galectin; a synthetic

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conjugate of cholic acid and arachidic acid from Galmed; an FXR agonist from Metacrine; FXR agonists from Novartis; a mitochondrial pyruvate complex modulator from Cirius; a PPAR delta agonist from CymaBay; and a PPAR alpha/delta agonist from Genfit. The foregoing competitive risks apply to NGM282 and NGM313 and any variants of NGM282 we may commercialize or, in the case of NGM313, Merck and we may commercialize, including the second-generation, half-life extended version of FGF19 we are currently developing.

If NGM386 or NGM395 were approved for the treatment of obesity, these products would face competition from currently approved and marketed products, including Saxenda (liraglutide), Contrave (bupropion and naltrexone), Qsymia (phentermine and topiramate extended-release), Belviq (lorcaserin HCL) and Xenical (orlistat). Further competition could arise from products currently in development, including Lilly’s LY3298176 (dual GLP-1/GIP receptor agonist). To the extent any of our product candidates are approved for cardio-metabolic indications, particularly obesity, the commercial success of our products will also depend on our ability to demonstrate benefits over the then-prevailing standard of care, including diet and exercise. Finally, morbidly obese patients sometimes undergo the gastric bypass procedure, with salutary effects on the many co-morbid conditions of obesity. Some of these programs have been advanced further in clinical development then our clinical programs or have already received regulatory approval.

If any of our product candidates were approved for the treatment of type 2 diabetes, these products would face competition from currently approved and marketed products, including: Biguanides; Sulfonylureas; Thiazolidinediones (TZDs); Alpha-glucosidase inhibitors (AGIs); Dipeptidyl peptidase 4 (DPP4) inhibitors; Glucagon-like peptide-1 (GLP-1) analogues; SGLT2 inhibitors; and Insulins, including injectable and inhaled versions. Further competition could arise from products currently in development, including: 11 beta HSD (Incyte, Japan Tobacco, Roche); GPR40 (Connexios, Takeda); and oral GLP-1 mimetics (Novo Nordisk). Some of these programs have been advanced further in clinical development than our product candidates and could receive approval before our product candidates are approved, if they are approved at all.

Our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical community necessary for commercial success.

Even if our product candidates receive regulatory approval, they may not gain adequate market acceptance among physicians, patients, healthcare payors, pharmaceutical companies and others in the medical community. Demonstrating the safety and efficacy of our product candidates and obtaining regulatory approvals will not guarantee future revenue. Our commercial success also depends on coverage and adequate reimbursement of our product candidates by third-party payors, including government payors, 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. We cannot be certain that third-party payors will sufficiently reimburse sales of our products, or otherwise enable us to sell our products at profitable prices. Similar concerns could also limit the reimbursement amounts that health insurers or government agencies in other countries are prepared to pay for our products. In many regions, including Europe, Japan and Canada, where we may market our products, either directly or with our collaborators, the pricing of prescription drugs is controlled by the government or regulatory agencies. Regulatory agencies in these 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

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allowing us to market our products at a premium as new drugs. The degree of market acceptance of any of our approved product candidates will depend on a number of factors, including:

Sales of medical products also depend on the willingness of physicians to prescribe the treatment, which is likely to be based on a determination by these physicians that the products are safe, therapeutically effective and cost effective. In addition, the inclusion or exclusion of products from treatment guidelines established by various physician groups and the viewpoints of influential physicians can affect the willingness of other physicians to prescribe the treatment. We cannot predict whether physicians, physicians’ organizations, hospitals, other healthcare providers, government agencies or private insurers will determine that our products are safe, therapeutically effective and cost effective as compared with competing treatments. 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 commercialize any of our product candidates, alone or with our partners, these products may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, 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. 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 marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. 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. 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 ability to commercialize any products successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, determine which medications they will cover and establish reimbursement levels. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical 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 marketing 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 regulatory 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 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.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act, was enacted, which includes measures that have significantly changed the way health care is financed by both governmental and private insurers. Some of the provisions of the Affordable Care Act have yet to be implemented, and there have been judicial and congressional challenges to certain aspects of the Affordable Care Act. In January 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the Affordable Care Act to waive, defer, grant exemptions from or delay the implementation of any provision of the Affordable Care Act that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers or manufacturers of pharmaceuticals or medical devices. The U.S. House of Representatives passed

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legislation known as the American Health Care Act of 2017 in May 2017. More recently, the Senate Republicans introduced and then updated a bill to replace the Affordable Care Act known as the Better Care Reconciliation Act of 2017. The Senate Republicans also introduced legislation to repeal the Affordable Care Act without companion legislation to replace it, and a “skinny” version of the Better Care Reconciliation Act of 2017.

Each of these measures was rejected by the full Senate. Congress will likely consider other legislation to replace elements of the Affordable Care Act. On December 14, 2018, a United States District Court judge in Texas ruled that the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017. While this U.S. District Court judge, as well as the Trump administration and Centers for Medicare and Medicaid Services, have stated that the ruling will have no immediate effect pending appeal of the decision, it is unclear how this decision, subsequent appeals and other efforts to repeal and replace the Affordable Care Act will impact the Affordable Care Act and our business.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For example, in August 2011, then-President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction, which triggered the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of, on average, 2% per fiscal year through 2025 unless Congress takes additional action. Recently, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. congressional inquiries and proposed bills 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. 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 in 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. 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. 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.

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 centers are located outside of the United States. Furthermore, if we or our collaborator succeeds in developing any products, we intend to market them in the European Union and other jurisdictions in addition to the United States. If approved, we or our collaborator may hire

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sales representatives and conduct physician and patient association outreach activities outside of the United States. Doing business internationally involves a number of risks, including but not limited to:

Any of these factors could harm our ongoing international clinical operations and supply chain, as well as any future international expansion and operations and, consequently, our business, financial condition, prospects and results of operations.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greater risk if we or our collaborator commercializes any resulting products. Product liability claims may be brought against us by subjects enrolled in our clinical trials, patients, healthcare providers or others using, administering or selling our products. If we cannot successfully defend ourselves against claims that our product candidates or products that we may develop caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

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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 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, physicians and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we or our collaborator obtains marketing approval. Our future arrangements with 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 market, sell and distribute our products for which we or our collaborator obtains marketing approval. Restrictions under applicable federal and state healthcare laws and regulations, include the following:

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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, 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.

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 facility has been subject to electrical blackouts as a result of a shortage of available electrical power. Future blackouts could disrupt the operations of our facility. 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 complete 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,

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and any losses or damages incurred by us could harm our business. The contract manufacturing organization that is the sole supplier of clinical drug substance of NGM313, NGM386, NGM395, NGM120, NGM217 and NGM621 is located in a region that has experienced recent political unrest.

Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security breaches.

Despite the implementation of security measures, our internal computer systems and those of our current and future CROs and other contractors and consultants may fail and are vulnerable to damage from computer viruses and unauthorized access. While we have not, to our knowledge, experienced any such material system failure or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss 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 and to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. In 2017, a security breach of the internal computer systems of our collaborator, Merck, caused material damage to their operations, but did not affect our internal operations. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed and the further development and commercialization of our product candidates could be hindered or delayed.

European data collection is governed by restrictive regulations governing the collection, use, processing and cross-border transfer of personal information.

We may collect, process, use or transfer personal information from individuals located in the European Union in connection with our business, including in connection with conducting clinical trials in the European Union. Additionally, if any of our product candidates are approved, we may seek to commercialize those products in the European Union. The collection and use of personal health data in the European Union is governed by the provisions of the General Data Protection Regulation ((EU) 2016/679), or the GDPR. This legislation imposes requirements relating to having legal bases for processing personal information relating to identifiable individuals and transferring such information outside of the European Economic Area, including to the United States, providing details to those individuals regarding the processing of their personal information, keeping personal information secure, having data processing agreements with third parties who process personal information, responding to individuals’ requests to exercise their rights in respect of their personal information, reporting security breaches involving personal data to the competent national data protection authority and affected individuals, appointing data protection officers, conducting data protection impact assessments and record-keeping. The GDPR imposes additional responsibilities and liabilities in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. Failure to comply with the requirements of the GDPR and related national data protection laws of the member states of the European Union may result in substantial fines, other administrative penalties and civil claims being brought against us, which could have a material adverse effect on our business, financial condition and results of operations.

We use and generate materials that may expose us to material liability.

Our research programs involve the use of hazardous materials, chemicals and radioactive and biological materials. We are subject to foreign, federal, state and local environmental and health and safety laws and regulations governing, among other matters, the use, manufacture, handling, storage and disposal of hazardous materials and waste products. We may incur significant costs to comply with

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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.

Risks Related to Our Dependence on Merck and Other Third Parties

We depend on our collaboration with Merck and may depend on collaborations with additional third parties for the development and commercialization of our product candidates in the future. If those collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.

In February 2015, we entered into a collaboration with Merck focused on the discovery, development and commercialization of biologics, including NGM313, NGM386, NGM395, NGM217, NGM120 and NGM621 but excluding NGM282. In November 2018, Merck exercised its option to license NGM313. On March 1, 2019, Merck notified us of its intent to terminate its license to the GDF15 receptor agonist program, including NGM386 and NGM395, effective May 31, 2019. On March 15, 2019, Merck exercised its option to extend the collaboration for an additional two years, from March 2020 through March 17, 2022. The collaboration involves a complex allocation of rights, provides for substantial research and development support, provides for additional payments upon Merck’s election to extend the term of the research program and 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 sharing arrangement with the possibility of providing sales representatives to co-detail the product candidates that Merck elects to advance in the United States. See “Business—Our Collaboration with Merck.” We cannot predict the success of the collaboration, including whether Merck exercises its option to license additional product candidates or terminates its license to a program.

We may seek other third-party collaborators for the development and commercialization of any product candidates that are not subject to the Merck collaboration, including NGM282. Our likely collaborators for any collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies. If we enter into any such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenue from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.

Collaborations involving our product candidates, including our collaboration with Merck, pose risks to us, including the following:

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Under certain circumstances, Merck may unilaterally terminate its annual funding of our research and development program, terminate or choose not to renew its agreement with us or shift the focus of its research and development funding, any of which would materially and adversely affect our business.

Under our collaboration agreement with Merck, Merck has the right to terminate all or part of the agreement at certain times and under certain circumstances. Merck may terminate the research and early development program effective March 17, 2022 by providing notice to us on or prior to March 17, 2021. Merck may terminate its annual funding of the research program prior to March 17, 2022 if we

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are acquired by a third party or if we are in material uncured breach of our obligations under the research and early development program. During the initial term of the Merck collaboration, the departure of Dr. Chen as our employee or director of our research (other than on account of his employment by Merck) gives rise to the right of Merck to shift the focus of the research and development funding provided by Merck to concentrate on the development of later-stage product candidates, but Merck would not have the right to terminate or otherwise alter the conduct of the collaboration. After the initial term of the collaboration or, if Merck exercises its option to extend the term, after such extension period, Merck may terminate the overall agreement for convenience upon written notice and subject to certain limitations.

Subject to certain limitations, Merck may partially terminate the agreement for convenience as it relates to NGM313 or any future optioned program. On March 1, 2019, Merck notified us of its intent to terminate its license to the GDF15 receptor agonist program, effective May 31, 2019. Merck may also terminate the agreement as it relates to its rights to research and develop small molecule compounds. It may also terminate the agreement with respect to a specific optioned program, such as NGM313, 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 global cost and profit sharing 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 optioned program.

If Merck terminates funding, terminates the collaboration agreement, decides not to further extend the research phase of the collaboration or shifts the focus of its research and development funding, it could impede our ability to fund and complete our research and development programs, which would materially and adversely affect our business.

We may not be able to obtain and maintain the third party relationships that are necessary to develop, commercialize and manufacture some or all of our product candidates.

In addition to our dependence on our collaboration with Merck, we expect to depend on other collaborators, partners, licensees, clinical research organizations, manufacturers and other third parties to support our discovery efforts, to formulate product candidates, to conduct clinical trials for some or all of our product candidates, to manufacture clinical and commercial scale quantities of our drug substance and drug product and to market, sell and distribute any products we successfully develop. Any problems we experience with any of these third parties could delay the development, commercialization and manufacturing of our product candidates, which could harm our results of operations.

We have contracted with third parties for the manufacture of NGM282, NGM313, NGM386, NGM395, NGM217, NGM120 and NGM621 bulk drug substance and drug product, and for the labeling and distribution of drug product for these candidates for use in our clinical trials. We believe our current drug substance contractors have the scale, the systems and the experience to supply our Phase 2 and Phase 2b clinical trials for NGM282, our collaborator’s Phase 1 and Phase 2b clinical trials for NGM313, our Phase 1 clinical trials for NGM217 and NGM120 and our planned Phase 1 clinical trial for NGM621.

Other than a long-term supply agreement with Lonza for NGM282, we have not contracted with alternate suppliers in the event the organizations we are currently utilizing are unable to scale production, or if we otherwise experience any problems with them. If we are unable to arrange for alternative third-party manufacturing sources, or to do so on commercially reasonable terms or in a timely manner, we may be delayed in the development of our product candidates.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product candidates or products ourselves, including reliance on third parties for

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regulatory compliance and quality assurance, 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 its own business priorities, at a time that is costly or damaging to us.

If any of our product candidates are approved by the FDA or other regulatory agencies for commercial sale, we or our collaborator may need to manufacture it in larger quantities. We intend to use third-party manufacturers for commercial quantities of NGM282, NGM386, NGM395, NGM217, NGM120 and NGM621 to the extent we advance these product candidates and will rely on our collaborator to determine whether to utilize a third-party manufacturer or internal manufacturing capacity for NGM313 and other optioned product candidates. Our or our collaborator’s manufacturers may not be able to successfully increase the manufacturing capacity for any of our product candidates in a timely or efficient manner, or at all. If we or our collaborator are unable to successfully increase the manufacturing capacity for a product candidate, the regulatory approval or commercial launch of that product candidate may be delayed or there may be a shortage in the supply of the product candidate. Our or our collaborator’s failure or the failure of third-party manufacturers to comply with the FDA’s cGMP and to pass inspections of the manufacturing facilities by the FDA or other regulatory agencies could seriously harm our business.

We cannot guarantee that we or, as applicable, our collaborator will be able to successfully negotiate agreements for, or maintain relationships with, collaborators, partners, licensees, clinical investigators, manufacturers and other third parties on favorable terms, if at all. If we or our collaborator are unable to obtain or 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.

We and our collaborator expect to expend substantial management time and effort to enter into relationships with third parties and, if we or our collaborator successfully enter into such relationships, to manage these relationships. In addition, substantial amounts of our expenditures will be paid to third parties in these relationships. However, we cannot control the amount or timing of resources our contract partners will devote to our research and development programs, product candidates or potential product candidates, and we cannot guarantee that these parties will fulfill their obligations to us under these arrangements in a timely fashion, if at all. 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, preclinical and clinical development and manufacturing of our programs and, therefore, enter into these relationships with less information than if these third parties were in the United States and may not choose the best parties for these relationships.

We may seek to establish additional collaborations, and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans.

Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fund expenses. For product candidates not partnered with Merck, such as NGM282, NGM386 and NGM395, we may decide to collaborate with other pharmaceutical and biotechnology companies for their development and potential commercialization.

We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside

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the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products and the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborators may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate.

We may also be restricted under existing collaboration agreements from entering into future agreements on certain terms with potential collaborators. For example, under our collaboration agreement with Merck, we may not directly or indirectly research, develop, manufacture or commercialize, except pursuant to the agreement, any medicine or product candidate that modulates a target then subject to the collaboration with specified activity. The FGF19 program, including NGM282, is excluded from this provision, notwithstanding that both NGM282 and NGM313 signal through the FGFR1c pathway. During the tail period following the research term, we may not directly or indirectly research, develop or commercialize, outside of the collaboration, any medicine or product candidate with specified activity against any collaboration target that has been designated a tail target.

Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms, or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.

We rely on third parties to conduct our clinical trials and some aspects of our research and preclinical testing, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research or testing.

We currently rely on, and expect to continue to rely on, third parties, such as contract research organizations, clinical data management organizations, medical institutions, consultants and clinical investigators, to conduct our clinical trials and certain aspects of our research and preclinical testing. Any of these third parties may terminate their engagements with us at any time. If we need to enter into alternative arrangements, it would delay our product development activities and such alternative arrangements may not be available on terms acceptable to us.

Our reliance on these third parties for research and development activities will reduce our control over these activities, but will not relieve us of our responsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly referred to as current Good Clinical Practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

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Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, 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 our medicines.

We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our medicines, producing additional losses and depriving us of potential product revenue.

We contract with third parties for the manufacture of our product candidates for preclinical testing and expect to continue to do so for clinical trials and for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or medicines or that such supply will not be available to us at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

We do not have any manufacturing facilities. We currently rely, and expect to continue to rely, on third-party manufacturers for the manufacture of our product candidates for preclinical and clinical testing and for commercial supply of any of these product candidates for which we or our collaborator obtains marketing approval. To date, we have obtained materials for NGM282, NGM313, NGM386, NGM395, NGM217, NGM120 and NGM621 for our preclinical and clinical testing from third-party manufacturers. Other than for a long-term supply agreement with Lonza for NGM282, we do not have a long-term supply agreement with any third-party manufacturer.

We may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able to establish agreements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

Third-party manufacturers may not be able to comply with current Good Manufacturing Practices, or cGMP, regulations or similar regulatory requirements outside the United States. Our failure, or the failure of third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or medicines, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our medicines and harm our business and results of operations.

Any medicines that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.

Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currently have arrangements in place for redundant

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supply for bulk drug substances. If any one of our current contract manufacturers cannot perform as agreed, we may be required to replace that manufacturer. Although we believe that there are several potential alternative manufacturers who could manufacture our product candidates, we may incur added costs and delays in identifying and qualifying any such replacement.

Our current and anticipated future dependence upon others for the manufacture of our product candidates or medicines may adversely affect our future profit margins and our ability to commercialize any medicines that receive marketing approval on a timely and competitive basis.

Risks Related to Regulatory Approvals

None of our product candidates has received regulatory approvals. If we are unable to obtain regulatory approvals to market one or more of our product candidates, our business will be adversely affected.

We do not expect our product candidates to be commercially available for several years, if at all. Our product candidates are subject to strict regulation by regulatory authorities in the United States and in other countries. We cannot market any product candidate until we have completed all necessary preclinical studies and clinical trials and have obtained the necessary regulatory approvals. We do not know whether regulatory agencies will grant approval for any of our product candidates. Even if we complete preclinical studies and clinical trials successfully, we may not be able to obtain regulatory approvals or we may not receive approvals to make claims about our products that we believe to be necessary to effectively market our products. Data obtained from preclinical studies and clinical trials is subject to varying interpretations that could delay, limit or prevent regulatory approval, and failure to comply with regulatory requirements or inadequate manufacturing processes are examples of other problems that could prevent approval. In addition, we may encounter delays or rejections due to additional government regulation from future legislation, administrative action or changes in the policies of the FDA or comparable foreign regulatory authorities. Even if the FDA or a comparable foreign regulatory authority approves a product, the approval will be limited to those indications covered in the approval.

The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time-consuming 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. The time required to obtain approval from the FDA and comparable foreign regulatory 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 regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing product candidates or any future product candidates will ever obtain regulatory approval.

Our product candidates could fail to receive regulatory approval from the FDA or a comparable foreign regulatory authority for many reasons, including:

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The FDA or a comparable foreign regulatory authority may require more information, including additional preclinical or clinical data to support approval, which may delay or prevent approval and our commercialization plans, or we may decide to abandon the development program for other reasons. If we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may grant approval contingent on the performance of costly post-marketing 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.

We have received orphan drug status for NGM282 for PBC in the United States and for PBC and PSC in the European Union. The FDA grants orphan drug designation to drugs intended to treat a rare disease or condition, which is generally defined as a disease or condition that affects fewer than 200,000 individuals in the United States and fewer than five in 10,000 individuals in the European Union. Typically, if a drug with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the drug is entitled to a period of marketing exclusivity, which precludes the FDA or the European Medicines Agency, or EMA, from approving another marketing application for the same drug for that time period. The applicable period is seven years in the United States and 10 years in the EU. The EU exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.

Although we have obtained orphan drug status for NGM282 for PBC and PSC, that exclusivity may not effectively protect the candidate from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior, in that it is shown to be safer, more effective or makes a major contribution to patient care. Any inability to secure orphan drug designation or the exclusivity benefits of this designation could have an adverse impact on our ability to develop and commercialize our product candidates. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. Obtaining orphan drug designation may not provide us with a material commercial advantage.

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. Fast Track designation applies to the combination of the product and the specific indication for which it is being

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studied. Unique to a Fast Track product, the FDA may consider for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA. Fast Track designation does not change the standards for product approval.

Although NGM282 has received Fast Track designation from the FDA for PBC and NASH, we may not necessarily experience faster development timelines or achieve faster review or approval compared to conventional FDA procedures. Access to an expedited program may also be withdrawn by the FDA if it believes that the designation is no longer supported by data from our clinical development program. Additionally, qualification for any expedited review procedure does not ensure that we will ultimately obtain regulatory approval for NGM282 or any other product candidate that we are developing or may develop.

Our failure to obtain regulatory approval in international jurisdictions would prevent us from marketing our product candidates outside the United States.

If we or our collaborators succeed in developing any products, we intend to market them in the European Union 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 reimbursement approvals before regulatory 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 regulatory 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. Also, regulatory approval for any of our product candidates may be withdrawn if we fail to comply with regulatory requirements, if problems occur after the product candidate reaches the market or for other reasons. If we fail to comply with the regulatory requirements in international markets and fail to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed and our business will be adversely affected. We may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions. Approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. If we fail to obtain approval of any of our product candidates by regulatory authorities in another country we will be unable to commercialize our product in that country, and the commercial prospects of that product candidate and our business prospects could decline.

Even if our product candidates receive regulatory approval, they may still face future development and regulatory difficulties.

Even if we obtained regulatory approval for a product candidate, it would be subject to ongoing requirements by the FDA and comparable foreign regulatory 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 regulatory authorities will continue to closely monitor the

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safety profile of any product even after approval. If the FDA or comparable foreign regulatory 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 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.

In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP, regulations and standards. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, or undesirable side effects caused by such products are identified, a regulatory agency may:

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, the Department of Justice, the Department of Health and Human Services’ 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 regulatory authorities will heavily scrutinize advertising and promotion of any product candidate that obtains approval outside of the United States.

In the United States, engaging in the impermissible promotion of our products for off-label uses can also subject us to false claims litigation under federal and state statutes, which can lead to civil and criminal penalties and fines and agreements that materially restrict the manner in which a company promotes or distributes drug products. These false claims statutes include the federal False Claims

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Act, 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 False Claims Act 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.

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, and we could be subject to costly and damaging product liability claims.

Even if we receive regulatory approval for NGM282 or any of our other product candidates, we will have tested them in only a small number of patients during our clinical trials. If our applications for marketing are approved and more patients begin to use our product, new risks and side effects associated with our products may be discovered. As a result, regulatory authorities may revoke their approvals. If NGM282 is approved by the FDA based on a surrogate endpoint pursuant to accelerated approval regulations (Subpart H and 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 NGM282 and our other product candidates. We might have to withdraw or recall our products from the marketplace. We may also experience a significant drop in the potential sales of our product if and when regulatory approvals for such product are obtained, experience harm to our reputation in the marketplace or become subject to lawsuits, including class actions. Any of these results could decrease or prevent any sales of our approved product or substantially increase the costs and expenses of commercializing and marketing our product.

Risks Related to Our Intellectual Property

Our success depends upon our ability to obtain and maintain intellectual property protection for our products and technologies.

Our success will depend in significant part on our and our current or future licensors’, licensees’ or collaborators’ ability to establish and maintain adequate protection of our intellectual property covering the product candidates we plan to develop, and the ability to develop these product candidates and commercialize the products resulting therefrom, without infringing the intellectual property rights of others. In addition to taking other steps to protect our intellectual property, we have applied for, and intend to

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continue to apply for, patents with claims covering our technologies, processes and product candidates when and where we deem it appropriate to do so. We have filed numerous patent applications both in the United States and in certain foreign jurisdictions to obtain patent rights to inventions we have discovered, 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 candidates or products that are substantially similar to our product candidates. In countries where we have not and do not seek patent protection, third parties may be able to manufacture and sell our product candidates without our permission, and we may not be able to stop them from doing so.

With respect to patent rights, we do not know whether any of the pending patent applications for any of our product candidates will result in the issuance of patents that effectively protect our technologies, processes and product candidates, or if any of our issued patents or our current or future licensors’, licensees’ or collaborators’ issued patents will effectively prevent others from commercializing competitive technologies, processes and products. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing or in some cases not at all, until they are issued as a patent. Therefore, we cannot be certain that we or our current or future licensors, licensees or collaborators were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our current or future licensors, licensees or collaborators were the first to file for patent protection of such inventions.

Any changes we make to our product candidates, including NGM282, NGM313, NGM386, NGM395 and NGM120, 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 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 our NGM282 molecule, including the half-life extended variant of FGF19 that we are developing, NGM313, NGM386, NGM395, NGM120 or any of our other product candidates.

We do not currently own or have a license to any issued patents that cover our NGM217 or NGM621 product candidates, although they are disclosed and claimed in our pending U.S. provisional, U.S. non-provisional and/or Patent Cooperation Treaty, or PCT, applications. The patent landscape surrounding NGM217 and NGM621 is crowded, and there can be no assurance that we will be able to secure patent protection that would adequately cover such product candidates, nor can there be any assurance that we would obtain sufficiently broad claims to be able to prevent others from selling competing products. For a description of our patent portfolio, see the section titled “Business—Intellectual Property—Patents and Other Proprietary Rights.”

The patent prosecution process is expensive and time-consuming, and we and our current or future licensors, licensees or collaborators may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we or our current or future licensors, licensees or collaborators will fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection for them. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain or enforce the patents, covering technology that we license from or license to third parties and may be reliant on our current or future licensors, licensees or collaborators to perform these activities, which means that these patent applications may not be prosecuted, and these patents enforced, in a manner consistent with the best interests of our business. If our current or future licensors, licensees or collaborators fail

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to establish, maintain, protect or enforce such patents and other intellectual property rights, such rights may be reduced or eliminated. If our current or future licensors, licensees or collaborators are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised.

Similar to other biotechnology companies, our patent position is generally highly uncertain and involves complex legal and factual questions. The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. In recent years, these areas have been the subject of much litigation in the industry. As a result, the issuance, scope, validity, enforceability and commercial value of our and our current or future licensors’, licensees’ or collaborators’ patent rights are highly uncertain. Our and our current or future licensors’, licensees’ or collaborators’ pending and future patent applications 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. The patent examination process may require us or our current or future licensors, licensees or collaborators to narrow the scope of the claims of pending and future patent applications, which would limit the scope of patent protection that is obtained, if any. Our and our current or future licensors’, licensees’ or collaborators’ patent applications cannot be enforced against third parties practicing the technology that is currently claimed in such applications unless and until a patent issues from such applications, and then only to the extent the claims that issue are broad enough to cover the technology being practiced by third parties.

Furthermore, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after the resulting products are commercialized. As a result, our owned and in-licensed patents may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. We expect to seek extensions of patent terms for our issued patents, where available. This includes in the United States under the Hatch-Waxman Act, which permits a patent term extension of up to five years beyond the original expiration date of the patent as compensation for regulatory delays. However, such a patent term extension cannot lengthen the remaining term of a patent beyond a total of 14 years from the product’s approval date. Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. During the period of patent term extension, the claims of a patent are not enforceable for their full scope, but are instead limited to the scope of the approved product. In addition, the applicable authorities, including the FDA in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. In addition, we may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to the expiration of relevant patents or otherwise failing to satisfy applicable requirements. If this occurs, any period during which we have the right to exclusively market our product will be shorter than we would otherwise expect, and our competitors may obtain approval of and launch products earlier than might otherwise be the case.

We may not be able to protect our intellectual property rights throughout the world.

The legal protection afforded to inventors and owners of intellectual property in countries outside of the United States may not be as protective or effective as that in the United States and we may, therefore, be unable to acquire and enforce intellectual property rights outside the United States to the same extent as in the United States. Whether filed in the United States or abroad, our patent applications may be challenged or may fail to result in issued patents.

In addition, our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from practicing our technologies or from developing or commercializing competing

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products. Furthermore, others may independently develop or commercialize similar or alternative technologies or drugs, or design around our patents. Our patents may be challenged, invalidated, circumvented or narrowed, or fail to provide us with any competitive advantages. In many foreign countries, patent applications and/or issued patents, or parts thereof, must be translated into the native language. If our patent applications or issued patents are translated incorrectly, they may not adequately cover our technologies; in some countries, it may not be possible to rectify an incorrect translation, which may result in patent protection that does not adequately cover our technologies in those countries.

Filing, prosecuting, enforcing and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States are 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 certain state laws in the United States. Consequently, we and our collaborator may not be able to prevent third parties from practicing our and our collaborator’s inventions in all countries outside the United States, or from selling or importing products made using our and our collaborator’s inventions in and into the United States or other jurisdictions. Competitors may use our and our collaborator’s technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we and our collaborator have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product candidates and our and our collaborator’s patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals. This could make it difficult for us and our collaborator to stop the infringement of our and our collaborator’s patents or the marketing of competing products in violation of our and our collaborator’s proprietary rights, generally. Proceedings to enforce our and our collaborator’s patent rights in foreign jurisdictions could result in substantial costs and divert our and

our collaborator’s efforts and attention from other aspects of our business, could put our and our collaborator’s patents at risk of being invalidated or interpreted narrowly, could place our and our collaborator’s patent applications at risk of not issuing and could provoke third parties to assert claims against us or our collaborator. We or our collaborator may not prevail in any lawsuits that we or our collaborator initiate and the damages or other remedies awarded, if any, may not be commercially meaningful.

The requirements for patentability differ in certain countries, particularly developing countries. For example, China has a heightened requirement for patentability and, specifically, requires a detailed description of medical uses of a claimed drug. In addition, India, certain countries in Europe and certain developing countries, including Thailand, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we and our collaborator may have limited remedies if patents are infringed or if we or our collaborator are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. 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. Accordingly, our and our collaborator’s efforts 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.

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Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance and annuity fees on issued United States patents and most foreign patent applications and patents must be paid to the U.S. Patent and Trademark Office, or USPTO, and foreign patent agencies, respectively, in order to maintain such patents and patent applications. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application, examination and issuance processes. While an inadvertent lapse can, in some cases, be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or our collaborator fail to maintain the patents and patent applications covering our product candidates, our competitors might be able to enter the market with similar or identical products or technology, which would have a material adverse effect on our business, financial condition and results of operations.

Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

As is the case with other biotechnology and pharmaceutical companies, our success is heavily dependent on intellectual property rights, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves technological and legal complexity, and obtaining and enforcing biopharmaceutical patents is costly, time-consuming and inherently uncertain. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances, weakening the rights of patent owners in certain situations or ruling that certain subject matter is not eligible for patent protection. In addition to increasing uncertainty with regard to our and our collaborator’s ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts, the USPTO and equivalent bodies in foreign jurisdictions, the laws and regulations governing patents could change in unpredictable ways that would weaken our and our collaborator’s ability to obtain new patents or to enforce existing patents and patents we and our collaborator may obtain in the future.

Patent reform laws, such as the Leahy-Smith America Invents Act, or the Leahy-Smith Act, as well as changes in how patent laws are interpreted, could increase the uncertainties and costs surrounding the prosecution of our and our collaborator’s patent applications and the enforcement or defense of our or our collaborator’s issued patents. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the filing and prosecution strategies associated with patent applications, including a change from a “first-to-invent” to a “first-inventor-to-file” patent system, and may also affect patent prosecution and litigation, such as by allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO-administered post-grant proceedings, including post-grant review, inter partes review and derivation proceedings. The USPTO has developed regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act and, in particular, the “first-inventor-to-file” provisions, became effective in 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act

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and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our collaborator’s patent applications and the enforcement or defense of our or our collaborator’s issued patents, all of which could have a material adverse effect on our business, financial condition and results of operations.

We may be unable to obtain intellectual property rights or technology necessary to develop and commercialize our product candidates.

Several third parties are actively researching and seeking and obtaining patent protection in the cardio-metabolic disease, NASH, oncology and ophthalmic fields, and there are issued third-party patents and published third-party patent applications in these fields. The patent landscape around our NGM282, NGM313, NGM386, NGM395, NGM217, NGM120 and NGM621 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 NGM282, NGM313, NGM386, NGM395, NGM217, NGM120 and NGM621 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 depending on 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 a third party does not offer us a necessary license or offers a license only on terms that are unattractive or unacceptable to us, we might be unable to develop and commercialize one or more of our product candidates, which would have a material adverse effect on our business, financial condition and results of operations. Moreover, even if we obtain licenses to such intellectual property, but subsequently fail to meet our obligations under our license agreements, or such license agreements are terminated for any other reasons, we may lose our rights to in-licensed technologies.

The licensing or acquisition of third-party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment, or at all. If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of the relevant program or product candidate, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

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 our or our collaborator’s patents or misappropriate or otherwise violate our or our collaborator’s intellectual property rights. In the future, we or our collaborator may initiate legal proceedings to enforce or defend our or our collaborator’s intellectual property rights, to protect our or our collaborator’s trade secrets or to determine the validity or scope of intellectual property rights we own or control. Also, third parties may initiate legal proceedings against us or our collaborator to challenge the validity or scope of intellectual property rights we own, control or to which we have rights. For example, generic or biosimilar drug manufacturers or other competitors or third parties may

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challenge the scope, validity or enforceability of our or our collaborator’s patents, requiring us or our collaborator to engage in complex, lengthy and costly litigation or other proceedings. These proceedings can be expensive and time-consuming and many of our or our collaborator’s adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or our collaborator can. Accordingly, despite our or our collaborator’s efforts, we or our collaborator 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. Litigation could result in substantial costs and diversion of management resources, which could harm our business and financial results. In addition, if we or our collaborator 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 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 is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our or our collaborator’s patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our or our collaborator’s 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-party pre-issuance submission of prior art to the USPTO, or opposition, derivation, revocation, reexamination, inter partes review or interference proceedings, or other pre-issuance or post-grant proceedings or other patent office proceedings or litigation in the United States or other jurisdictions provoked by third parties or brought by us or our collaborator, may be necessary to determine the inventorship, priority, patentability or validity of inventions with respect to our or our collaborator’s patents or patent applications. An unfavorable outcome could leave our technology or product candidates without patent protection, allow third parties to commercialize our technology or product candidates and compete directly with us, without payment to us, or could require us or our collaborator to obtain license rights from the prevailing party in order to be able to manufacture or commercialize our product candidates without infringing third-party patent rights. Our business could be harmed if the prevailing party does not offer us or our collaborator a license on commercially reasonable terms, or at all. Even if we or our collaborator obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us or our collaborator. In addition, if the breadth or strength of protection provided by our or our collaborator’s patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates. Even if we successfully defend such litigation or proceeding, we may incur substantial costs and it may distract our management and other employees.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, many foreign jurisdictions have rules of discovery that are different than those in the United States and that may make defending or enforcing our or our collaborator’s patents extremely difficult. There could also 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.

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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 intellectual property rights controlled by third parties, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability and the ability of our collaborator to develop, manufacture, market and sell any product candidates that we may develop and use our proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property and proprietary rights of third parties. The biotechnology and pharmaceutical industries are characterized by extensive litigation regarding patents and other intellectual property rights. Third parties may initiate legal proceedings against us or our collaborator alleging that we or our collaborator infringe their intellectual property rights or we or our collaborator may initiate legal proceedings against third parties to challenge the validity or scope of intellectual property rights controlled by third parties, including in oppositions, interferences, revocations, reexaminations, inter partes review or derivation proceedings before the USPTO or its counterparts in other jurisdictions. These proceedings can be expensive and time-consuming and many of our or our collaborator’s adversaries in these proceedings may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we or our collaborator can.

For example, through our European representative, we filed an opposition in the European Patent Office, or EPO, to a patent granted to St. Vincent’s Hospital Sydney Limited, or St. Vincent’s, claiming the use of MIC-1, also known as GDF15, in the treatment of obesity. In the first instance proceedings, the Opposition Division at the EPO upheld the patent as granted. We have appealed this decision to the Board of Appeals at the EPO, and the patentee filed its reply to our grounds for appeal in November 2018. Although there are uncertainties regarding EPO appeal timelines, summons to oral proceedings will likely issue towards the end of 2019, and oral proceedings are likely to be scheduled six to twelve months thereafter. The St. Vincent’s patent as granted is currently scheduled to expire in April 2025. Even should the patent be upheld on appeal, we and our collaborator do not believe that NGM386 and/or NGM395 would be commercially launched until after expiration of the patent. In addition, we and our collaborator have filed an opposition in the EPO to a patent granted to Amgen Inc., or Amgen, claiming the use of GDF15 polypeptides for the treatment of several metabolic disorders. At the first instance proceedings, the Opposition Division at the EPO maintained the patent in amended form, with claims not including obesity, the indication for which we are presently pursuing regulatory approval for NGM386 and NGM395. We plan to appeal this decision to the Board of Appeals at the EPO. The Amgen patent as granted is currently scheduled to expire in April 2032. If these patents have not expired, or are not ultimately deemed invalid in appeals stemming from the opposition proceedings, and/or our non-infringement positions are not upheld, and these patents are successfully asserted against us in a European country court proceeding after the approval of either of our NGM386 or NGM395 product candidates for the treatment of obesity in Europe, then we may be required to obtain licenses to such patents in order to commercialize our GDF15 program product candidates, and there can be no assurance that such licenses would be available on commercially reasonable terms, or at all.

Additionally, in November 2018 we filed an opposition in the EPO to a patent granted to Genentech, Inc., or Genentech, claiming the use of an anti-KLB agonist antibody for treating diabetes mellitus or insulin resistance. We are one of two opponents challenging the Genentech patent as granted on numerous grounds, including lack of novelty and inventive step, insufficiency and claiming subject matter that extends beyond the application as originally filed. The deadline for Genentech’s response to opposition is April 2019. Thereafter, the EPO’s summons to oral proceedings is expected in the range of July to September 2019. The Genentech patent is currently scheduled to expire in April 2028. If the Genentech patent is not invalidated in the opposition proceedings and appeals, has not

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expired and/or our non-infringement positions are not upheld, and this patent is successfully asserted against us or our collaborator in a European country court proceeding after the approval of our NGM313 product candidate for the treatment of diabetes in Europe, then we and/or our collaborator may be required to obtain a license to this patent in order to commercialize our NGM313 product candidate, and there can be no assurance that such license would be available on commercially reasonable terms, or at all. An unfavorable outcome in any such proceeding could require us or our collaborator to cease using the related technology or developing or commercializing our product candidates, or to attempt to license rights to it from the prevailing party, which may not be available on commercially reasonable terms, or at all.

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 perform searches of patent and scientific databases in order to identify documents that may be of potential relevance to the freedom-to-operate and/or patentability of our product candidates. In general, such searches are conducted based on keywords, sequences, inventors/authors and assignees/entities to capture U.S. and European patents and patent applications, PCT publications and scientific journal articles. There can be no assurance that such searches will identify all potentially relevant patents or patent applications, and the failure to identify any such patents or patent applications could have a material adverse effect on the commercialization of our product candidates.

The patent landscape around our NGM282, NGM313, NGM386, NGM395, NGM217, NGM120 and NGM621 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 NGM282, NGM313, NGM386, NGM395, NGM217, NGM120 and NGM621 product candidates. However, we may not be aware of all third-party intellectual property rights potentially relating to our product candidates and technologies. We are not aware of any facts that would lead us to conclude that the valid and enforceable claims of any third-party patents would reasonably be interpreted to encompass our product candidates, unless we are unsuccessful in our opposition of any of the granted European patents that are discussed above, or any appeals stemming therefrom. As to pending third-party applications, we cannot predict with any certainty which claims will issue, if any, or the scope of such issued 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. A court of competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, which could materially and adversely affect our ability and the ability of our collaborator to commercialize any product candidates we may develop and any other product candidates or technologies covered by the asserted third-party patents. 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. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. If any such third-party patents (including those that may issue from such applications) were successfully asserted against us or our collaborator or other commercialization partners and we were unable to successfully challenge the validity or enforceability of any such asserted patents, then we or our collaborator and other commercialization partners may be prevented from commercializing our product candidates, or may be required to pay significant damages, including treble damages and attorneys’ fees if we are found to willfully infringe the asserted patents, or obtain a license to such patents, which may not be available on commercially reasonable terms, or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make

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substantial licensing and royalty payments. Any of the foregoing would have a material adverse effect on our business, financial condition and operating results.

We may be subject to claims by third parties asserting that our employees or we have misappropriated a third party’s intellectual property, or claiming ownership of what we regard as our own intellectual property.

Many of our employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these employees executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these 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. Litigation may be necessary to defend against these claims. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain other damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms, or at all. Even if we successfully prosecute or defend against such claims, litigation could result in substantial costs and distract management.

In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. Such claims could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we breach any license agreement related to our product candidates, we could lose the ability to continue the development and commercialization of our product candidates.

Our commercial success depends upon our ability, and the ability of our licensors and collaborator, to develop, manufacture, market and sell our product candidates and use our and our collaborator’s 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 licenses that are important to our business and 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 which event 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 a license agreement with Lonza Sales AG, or Lonza Sales, under which we license cell lines used to produce our product candidates that are currently subject to our collaboration with Merck. We require Lonza Sales’ prior consent to grant sub-licenses under this agreement and therefore Lonza Sales 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.

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See the section titled “Business—Intellectual Property—Licensing Arrangements” for more information regarding this agreement. Any of the foregoing could materially adversely affect the value of the 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.

Our inability to protect our confidential information and trade secrets would harm our business and competitive position.

In addition to seeking patents for some of our technology and products, in our activities we also rely substantially on trade secrets, including unpatented know-how, technology and other proprietary materials and information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. However, these steps may be inadequate, we may fail to enter into agreements with all such parties or any of these parties may breach the agreements and disclose our proprietary information and there may be no adequate remedy available for such breach of an agreement. We cannot assure you that our proprietary information will not be disclosed or that we can meaningfully protect our trade secrets. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts both within and outside the United States may be less willing, or unwilling, to protect trade secrets. If a competitor lawfully obtained or independently developed any of our trade secrets, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position.

Intellectual property rights do not necessarily address all potential threats.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

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Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects.

Risks Related to this Offering and Ownership of Our Common Stock

We do not know whether an active, liquid and orderly trading market will develop for our common stock or what the market price of our common stock will be and, as a result, it may be difficult for you to sell your shares of our common stock.

Prior to this offering, no market for shares of our common stock existed and an active trading market for our shares may never develop or be sustained following this offering. We determined the initial public offering price for our common stock through negotiations with the underwriters, and the negotiated price may not be indicative of the market price of our common stock after this offering. The market value of our common stock may decrease from the initial public offering price. As a result of these and other factors, you may be unable to resell your shares of our common stock at or above the initial public offering price. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. Furthermore, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic collaborations or acquire companies or products by using shares of our common stock as consideration.

The market price of our stock may be volatile, and you could lose all or part of your investment.

The trading price of our common stock following this offering is likely to be highly volatile and subject to wide fluctuations in response to various factors, some of which we cannot control. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this prospectus, these factors include:

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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. Broad market and industry factors 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 in this “Risk Factors” section, could have a dramatic and material adverse impact on the market price of our common stock.

Because of potential volatility in our trading price and trading volume, we may incur significant costs from class action securities litigation.

Holders of stock in companies that have a volatile stock price frequently bring securities class action litigation against the company that issued the stock. We may be the target of this type of litigation in the future. If any of our stockholders were to bring a lawsuit of this type against us, even if the lawsuit is without merit, we could incur substantial costs defending the lawsuit. A stockholder lawsuit could also divert the time and attention of our management. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. You will not have the opportunity, as part of your investment decision, to assess whether we are using the proceeds appropriately. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

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Our principal stockholders, including Merck, and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

Prior to this offering and the concurrent private placement to Merck, our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates beneficially owned approximately 77.3% of our voting stock and, upon completion of this offering and the concurrent private placement to Merck, and reflecting the purchase in this offering of 1,875,000 shares of our common stock by entities affiliated with The Column Group. That same group will hold approximately 80.2% of our outstanding voting stock (assuming no exercise of the underwriters’ option to purchase additional shares, no exercise of outstanding options and no purchases of shares in this offering by any of this group), in each case assuming the conversion of all outstanding shares of our convertible preferred stock into shares of our common stock in connection with this offering. In particular, after this offering and the concurrent private placement, Merck will own approximately 19.9% of our voting stock and entities affiliated with The Column Group will own approximately 23.7% of our voting stock. After this offering and the concurrent private placement to Merck, this group of stockholders will have the ability to control us through this ownership position even if they do not purchase any additional shares in this offering. However, Merck has granted a proxy to the chairman of our board of directors to vote Merck’s shares in favor of any action recommended and approved by our board of directors, subject to certain exceptions. These stockholders may be able to determine all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders. The interests of this group of stockholders may not always coincide with your interests or the interests of other stockholders and they may act in a manner that advances their best interests and not necessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.

We are an “emerging growth company” as defined in the JOBS Act and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors and adversely affect the market price of our common stock.

For so long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various requirements applicable to public companies that are not “emerging growth companies” including:

We may take advantage of these reporting exemptions until we are no longer an emerging growth company, which in certain circumstances could be for up to five years. We will cease to be an

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“emerging growth company” upon the earliest of: (1) the last day of the fiscal year following the fifth anniversary of this offering; (2) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the date on which we are deemed to be a “large accelerated filer” as defined in the Exchange Act.

Although we are still evaluating the JOBS Act, we currently intend to take advantage of some, but not all, of the reduced regulatory and reporting requirements that will be available to us so long as we qualify as an “emerging growth company.” We have elected to avail ourselves of this exemption and, therefore, we are not subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, changes in rules of U.S. generally accepted accounting principles or their interpretation, the adoption of new guidance or the application of existing guidance to changes in our business could significantly affect our financial position and results of operations. In addition, our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an “emerging growth company,” which may increase the risk that material weaknesses or significant deficiencies in our internal control over financial reporting go undetected. Likewise, so long as we qualify as an “emerging growth company,” we may elect not to provide you with certain information, including certain financial information and certain information regarding compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the SEC, which may make it more difficult for investors and securities analysts to evaluate our company. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile and may decline.

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 with frequency 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. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Newly Issued Accounting Pronouncements.”

In particular, in May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised 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. As an “emerging growth company,” the JOBS Act allows us to delay adoption of new or revised accounting standards applicable to public companies until such pronouncements are made applicable to private companies. We have elected to use this extended transition period under the JOBS Act with respect to ASU 2014-09 and anticipate adopting ASU 2014-09 effective January 1, 2019, under the modified retrospective method. While we have not completed our final assessment of the impact, the adoption of ASU 2014-09 may have a material effect on our consolidated financial statements.

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We will incur increased costs as a result of operating as a public company, and our management will devote substantial time to new compliance initiatives.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, and these expenses may increase even more after we are no longer an “emerging growth company.” As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Protection Act, as well as rules adopted, and to be adopted, by the SEC and the Nasdaq Global Select Market. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. The increased costs will increase our net loss. For example, we expect these rules and regulations to 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 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 implementing new internal controls and procedures and hiring new accounting or internal audit staff. The Sarbanes-Oxley Act requires 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. Any failure to develop or maintain effective controls could adversely affect the results of periodic management evaluations. In the event that we are not able to demonstrate compliance with the Sarbanes-Oxley Act, that our internal control over financial reporting is perceived as inadequate or that we are unable to produce timely or accurate financial statements, 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.

We are not currently required to comply with the SEC’s rules that implement Section 404 of the Sarbanes-Oxley Act, or Section 404, and are therefore not yet required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with certain of these rules, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report. This assessment will need to include the disclosure of any material weaknesses in our internal control over financial reporting identified by our management or our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will need to continue to dedicate internal resources, outside consultants and continue to execute a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes, as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements and we cannot assure you that there will not be material weaknesses or significant deficiencies in our internal controls in the future.

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Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have outstanding 64,993,706 shares of common stock based on the number of shares outstanding as of December 31, 2018, assuming: (i) no exercise of the underwriters’ option to purchase up to 1,000,000 additional shares; and (ii) the conversion of all outstanding shares of our convertible preferred stock into 47,267,466 shares of common stock upon the completion of this offering. This includes the shares that we sell in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates, and the private placement to Merck. Substantially all of the shares of our common stock not sold in this offering (including shares issuable upon exercise or conversion of existing securities and shares issuable to Merck in the concurrent private placement) will be locked up as a result of securities laws or lock-up agreements but will be able to be sold after this offering as described in the section titled “Shares Eligible for Future Sale.” Moreover, after this offering, holders of an aggregate of 47,267,466 shares of our common stock will 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 also intend to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the section titled “Underwriting.”

If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.

The initial public offering price is substantially higher than the net tangible book value per share of our common stock. Investors purchasing common stock in this offering will pay a price per share that substantially exceeds the book value of our tangible assets after subtracting our liabilities. As a result, investors purchasing common stock in this offering will incur immediate dilution of $10.64 per share, based on the initial public offering price of $16.00 per share. Further, investors purchasing common stock in this offering will contribute approximately 22% of the total amount invested by stockholders since our inception, but will own only approximately 10% of the shares of common stock outstanding.

This dilution is due to our investors who purchased shares prior to this offering having paid substantially less than the price offered to the public in this offering when they purchased their shares including the exercise of stock options granted to our employees. As of December 31, 2018, options to purchase 9,806,689 shares of our common stock at a weighted average exercise price of $5.86 per share were outstanding, and all options are currently exercisable. The exercise of any of these options would result in additional dilution. As a result of the dilution to investors purchasing shares in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of a liquidation.

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.

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Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

Upon completion of this offering, we will become subject to the periodic reporting requirements of the Exchange Act. 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 that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

Some provisions of our charter documents, Delaware law and our collaboration 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 that will become effective upon the completion of this offering, 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 remove our current management. These provisions include:

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, who are responsible for appointing the members of our management. Because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which may discourage, delay or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders. In addition, Section 203 of the DGCL, prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, which is generally a person which 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.

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Certain provisions in our collaboration agreements may also deter a change of control. For example, under our agreement with Merck, a change of control gives Merck the right to terminate our research and early development program 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 optioned by Merck. See the section titled “Business—Our Collaboration with Merck” for more information.

Any provision of our amended and restated certificate of incorporation, amended and restated bylaws, Delaware law or our collaboration 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 to be in effect upon the completion of this offering will provide that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: any derivative action or proceeding brought on our behalf; any action asserting a breach of a fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. This provision would not apply to claims brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Our amended and restated certificate of incorporation to be in effect upon the completion of this offering will provide further 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, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of such exclusive forum provision. These choice of 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. If a court were to find either choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business. For example, the Court of Chancery of the State of Delaware recently determined that the exclusive forum provision of federal district courts of the United States for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable. However, this decision may be reviewed and ultimately overturned by the Delaware Supreme Court. If this ultimate adjudication were to occur, the federal district court exclusive forum provision in our amended and restated certificate of incorporation would no longer be contingent.

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.

The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company or if they cease to cover our company, the trading price for our stock would likely be negatively impacted. In the event that securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or

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unfavorable research about our business, our stock price would likely decline. In addition, if our operating results fail to meet the forecast of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections titled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements. We may, in some cases, use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “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 prospectus include, but are not limited to, statements about:

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These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this prospectus and are subject to risks and uncertainties. We discuss many of these risks in greater detail under the section titled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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INDUSTRY AND MARKET DATA

This prospectus contains estimates, projections and other information concerning our industry and our business, including estimated market size, projected growth rates and the prevalence of certain medical conditions. Unless otherwise expressly stated, we obtained this industry, business, market, medical and other information from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general publications, government data and similar sources.

This industry, business, market, medical and other information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified any third-party information and cannot assure you of its accuracy or completeness. Although we are responsible for all of the disclosure contained in this prospectus and we believe the market position, market opportunity, market size and medical information included in this prospectus is reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

In some cases, we do not expressly refer to the sources from which data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

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USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $95.7 million, or approximately $110.6 million if the underwriters exercise their option to purchase additional shares in full, from the sale of the shares of common stock offered by us in this offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. Additionally, we estimate that our net proceeds from the concurrent private placement to Merck will be $65.9 million.

The principal purposes of this offering are to obtain additional capital to support our operations, to establish a public market for our common stock and to facilitate our future access to the public equity markets. We anticipate that we will use the net proceeds of this offering, together with our existing cash, cash equivalents and short-term marketable securities, for the following purposes:

We expect to decide whether to advance NGM386 and/or NGM395 following our analysis of the results of the NGM386 Phase 1 trial.

We may also use a portion of the remaining net proceeds to in-license, acquire, or invest in complementary businesses, technologies, products or assets. However, we have no current commitments or obligations to do so.

We believe that the net proceeds from this offering, together with our existing cash, cash equivalents and short-term marketable securities and the funding we expect to receive under the initial term of our existing agreement with Merck, will be sufficient to fund our operations through 2020, or through 2021 with the additional proceeds from the concurrent private placement to Merck. In particular, we expect that these funds will allow us to complete our ongoing Phase 2 and planned Phase 2b clinical trials and begin preparation for Phase 3 clinical trials of NGM282 for NASH.

Following this offering, we will require substantial capital to complete clinical development, seek regulatory approval of and, if approved, commercialize NGM282 and our other programs. For each

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compound subject to our agreement with Merck, Merck has a one-time option to obtain an exclusive, worldwide license. If Merck chooses to exercise its option with respect to a compound, from that point forward all development costs relating to that compound will be paid for by Merck, unless we elect to exercise our worldwide cost and profit sharing option at the commencement of Phase 3 testing, at which point we would be responsible for a portion of the future development expense. We will incur additional expenses for the development of any compound for which Merck does not exercise its option, for which Merck elects to terminate its license, such as NGM386 and NGM395, or for which we elect to exercise our worldwide cost and profit sharing option. We may seek additional funds through public or private equity, debt financings or other sources, including strategic collaborations. However, changing circumstances may cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control.

Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering, or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors, including the progress of our clinical trials and other development efforts for our product candidates and other factors described in the section titled “Risk Factors,” as well as the amount of cash we use in our operations. As a result, our management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds of this offering. In addition, we might decide to postpone or not pursue clinical trials or preclinical activities if the net proceeds from this offering and the other sources of cash are less than expected.

Pending their use, we plan to invest the net proceeds from this offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

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DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant.

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CAPITALIZATION

The following table sets forth our cash, cash equivalents and short-term marketable securities, and our capitalization as of December 31, 2018, as follows:

The pro forma information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with the sections titled “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.

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The number of shares of our common stock outstanding after the offering and the concurrent private placement to Merck is based on 54,224,993 shares of our common stock outstanding as of December 31, 2018 (including convertible preferred stock then outstanding on an as-converted basis), and excludes:

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering.

Our historical net tangible book value (deficit) as of December 31, 2018 was approximately ($110.5) million, or ($15.93) per share of our common stock. Our historical net tangible book deficit is the amount of our total tangible assets less our deferred IPO costs, liabilities and convertible preferred stock, which is not included within stockholders’ deficit. Historical net tangible book deficit per share is our historical net tangible book deficit divided by the number of shares of common stock outstanding as of December 31, 2018.

Our pro forma net tangible book value as of December 31, 2018 was $184.6 million, or $3.40 per share of common stock. Pro forma net tangible book value gives effect to the conversion of all of our outstanding convertible preferred stock into an aggregate of 47,267,466 shares of our common stock and the reclassification to additional paid-in capital of our Series A convertible preferred stock warrant liability in connection with the conversion of our outstanding Series A convertible preferred stock warrant into shares of common stock, which are included in stockholders’ equity, which will occur automatically in connection with the completion of this offering.

Pro forma as adjusted net tangible book value is our pro forma net tangible book value, plus the effect of the sale of 10,788,350 shares of our common stock in this offering and the concurrent private placement to Merck at the initial public offering price and private placement purchase price of $16.00 per share, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $1.96 per share to our existing stockholders, and an immediate dilution of $10.64 per share to new investors participating in this offering.

The following table illustrates this dilution on a per share basis:

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If the underwriters exercise in full their option to purchase 1,000,000 additional shares of our common stock in this offering, the pro forma as adjusted net tangible book value would be $5.51 per share, representing an immediate increase in pro forma as adjusted net tangible book value to existing stockholders of $2.11 per share, and the dilution to new investors purchasing shares in this offering would be $10.49 per share.

The following table summarizes, on a pro forma as adjusted basis as of December 31, 2018, the number of shares of our common stock, the total consideration and the average price per share (i) paid to us by our existing stockholders and (ii) to be paid by new investors participating in this offering and the concurrent private placement to Merck at the initial public offering price and private placement purchase price of $16.00 per share, before deducting underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their option in full to purchase 1,000,000 additional shares of our common stock in this offering, the number of shares of common stock held by existing stockholders will be reduced to 82% of the total number of shares of common stock to be outstanding after this offering and the concurrent private placement to Merck, and the number of shares of common stock held by investors participating in this offering will be further increased to 11,788,350, or 18% of the total number of shares of common stock to be outstanding after this offering and the concurrent private placement to Merck.

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The foregoing discussion and tables are based on 54,224,993 shares of our common stock outstanding as of December 31, 2018 (including convertible preferred stock then outstanding on an as-converted basis), and excludes:

We may choose to raise additional capital through the sale of equity or convertible debt securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent we issue additional shares of common stock or other equity or convertible debt securities in the future, there will be further dilution to investors participating in this offering.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read together with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus. We derived the selected consolidated statements of operations data for the years ended December 31, 2017 and 2018 and the selected consolidated balance sheet data as of December 31, 2017 and 2018 from our audited consolidated financial statements and related notes appearing elsewhere in this prospectus. The selected consolidated financial data in this section are not intended to replace our consolidated financial statements and the related notes. Our historical results are not necessarily indicative of the results to be expected in the future.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with “Selected Consolidated Financial Data” and our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain 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, including those set forth under “Risk Factors” and elsewhere in this prospectus. You should carefully read the “Risk Factors” section of this prospectus to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage biopharmaceutical company developing novel therapeutics based on our scientific understanding of key biological pathways underlying cardio-metabolic, liver, oncologic and ophthalmic diseases. These diseases are among the largest unmet medical needs globally and represent leading causes of morbidity and mortality and a significant burden for healthcare systems. Since the commencement of our operations in 2008, we have generated a robust portfolio of seven product candidates, five of which are in clinical testing. Our most advanced product candidate, NGM282, is wholly-owned and will enter Phase 2b development for the treatment of non-alcoholic steatohepatitis, or NASH, in mid-2019. In an ongoing Phase 2 clinical trial, NGM282 has demonstrated the ability to rapidly improve NASH and reverse liver fibrosis at 12 weeks. Our other programs are in Phase 1 clinical or preclinical testing and subject to our Merck collaboration described below.

In February 2015, we entered into a five-year research collaboration, product development and license agreement with Merck Sharp & Dohme Corp., or Merck, that allows us to develop multiple product candidates in parallel without bearing substantially greater costs or incurring significantly greater risk compared to developing candidates on our own. For a detailed explanation see the section “Business—Our Collaboration with Merck.” Through December 31, 2018, Merck has paid us $336.4 million, of which $94.0 million was an upfront payment, $20.0 million was to license NGM313 and related compounds and $222.4 million was reimbursement of research and development expenses. On March 15, 2019, Merck exercised its option to extend the collaboration through March 17, 2022, and has the right to extend it again through March 17, 2024.

We have incurred net losses in each year since our inception. Our consolidated net losses were $14.2 million and $0.5 million for the years ended December 31, 2017 and 2018, respectively. As of December 31, 2018, we had an accumulated deficit of $147.2 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative 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 research and development activities.

Since inception, we have funded our operations primarily through the private placement of convertible preferred stock totaling $294.9 million, upfront license fees paid by collaboration partners of $123.0 million, the license of NGM313 and related compounds to Merck for $20.0 million and research and development service fees provided by collaboration partners of $239.2 million. We do not have any products approved for sale and do not anticipate generating revenue from product sales for the

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foreseeable future, if ever. Accordingly, to fund further operations we may need to raise capital in addition to the net proceeds from this offering, the concurrent private placement to Merck and amounts that may be available under our collaboration agreement with Merck. Until such time as we can generate meaningful revenue from product sales, if ever, we expect to finance our operating activities through public or private equity or debt financings, collaborations, strategic alliances and licensing arrangements, government or other third-party funding, or a combination of these. We may not be able to secure additional funding on terms acceptable to us, or at all, and any failure to secure funding as and when needed could compromise our ability to execute on our business plan, which could materially and adversely affect our business, financial condition and results of operations.

We have no manufacturing facilities, and all of our manufacturing activities are contracted out to third parties. Additionally, we currently utilize third-party clinical research organizations, or CROs, to carry out our clinical development and we do not have a sales organization.

Financial Operations Overview

Collaboration Revenue

Our revenue to date has been generated primarily from recognition of license fees and research and development service funding pursuant to our collaboration agreements, the most significant of which is with Merck. Merck is also a significant stockholder and, as such, collaboration revenue from Merck is referred to as related party revenue. We have not generated any revenue from commercial product sales to date. We receive research and development funding pursuant to our collaboration agreements, and we may also be entitled to receive additional milestone and other contingent payments pursuant to our research collaboration product development and license agreement with Merck upon the occurrence of specific events. Due to the nature of these collaboration agreements and the nonlinearity of the related revenue recognition, our revenue has fluctuated from period to period in the past and we expect that it will continue to fluctuate in future periods. In addition, we are required to adopt ASC 606 for the year ending December 31, 2019, which may have a material impact on the timing of our revenue recognition.

The following table summarizes the sources of our collaboration revenue for the years ended December 31, 2017 and 2018:

Research and Development Expenses

Research and development efforts relating to our product candidates include manufacturing drug substance, drug product and clinical trial material, conducting preclinical testing and clinical trials and providing support for these operations.

Our research and development expenses consist of both internal and external costs. Our internal costs include employee, consultant, facility and other research and development 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 costs related to acquiring and manufacturing drug substance, drug product and clinical trial materials.

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Our clinical development efforts are focused on multiple programs. Our lead product candidate, NGM282, is the subject of ongoing and planned Phase 2 clinical trials for NASH. We anticipate the majority of our financial resources outside of the Merck collaboration will be dedicated to the development of NGM282 for the foreseeable future, however, we may also devote financial resources to the development of our GDF15 receptor agonist program, or to our other programs in the event Merck does not elect to license these programs upon completion of a proof-of-concept study, or in the event Merck elects to terminate its license to a program. Additionally, if our research and development expenses were to exceed the funding caps provided in our collaboration agreement with Merck, we could be required to devote our financial resources toward the development of those programs subject to the collaboration.

The NGM282 clinical trials we have initiated or plan to initiate include: (1) a 24-week expansion cohort of NGM282 (cohort 4) under our ongoing Phase 2 protocol as a double-blind, placebo-controlled study of once-daily 1 mg NGM282 for the treatment of patients with fibrosis stage F2 or F3 NASH, (2) a Phase 2b clinical trial of NGM282 in a double-blind, placebo-controlled format testing 0.3 mg, 1 mg and 3 mg daily doses of NGM282 for 24 weeks for the treatment of patients with fibrosis stage F2 or F3 NASH and (3) a Phase 2b clinical trial of NGM282 for the treatment of NASH patients with early cirrhosis (F4 stage fibrosis). Significant portions of our research and development resources are focused on these clinical trials and other work needed to prepare NGM282 for regulatory approval for the treatment of NASH, including preparation for Phase 3 testing of NGM282 in NASH.

Our NGM313 product candidate has completed single ascending dose and multiple ascending dose Phase 1 testing in overweight or obese but otherwise healthy adults, as well as a Phase 1b study in obese insulin resistant subjects with nonalcoholic fatty liver disease, or NAFLD. Merck exercised its option to license the NGM313 program, and all future development expenses will be paid for by Merck unless we elect to exercise our worldwide cost and profit sharing option at the commencement of Phase 3 testing, at which point we would be responsible for a portion of the future development expense.

We are also conducting Phase 1 clinical trials for NGM120 and NGM217, each of which is subject to reimbursement under our Merck collaboration up to the funding caps provided in the agreement. NGM120 is currently in a Phase 1 clinical trial assessing safety, tolerability and pharmacokinetics. In 2019 we are planning to conduct a clinical study with NGM120 in cancer patients to explore proof of concept as an agent to treat CACS and, possibly, cancer. Merck has the option to license NGM120 following completion of a proof-of-concept study in humans.

We are also conducting a Phase 1 clinical trial with NGM217 to assess safety and tolerability and to inform dose-range finding for future studies. Thereafter, we plan to commence a Phase 1b/2a proof-of-concept study in diabetic patients to assess the ability of the agent to increase insulin production by the pancreas. Merck has the option to license NGM217 following completion of a proof-of-concept study in humans.

NGM621 is currently in IND-enabling studies to enable initiation of a Phase 1 clinical trial in the second half of 2019. We expect the Phase 1 clinical trial will assess the safety and tolerability of up to two intravitreal injections of NGM621 in patients with the dry form of age-related macular degeneration. Merck has the option to license NGM621 following completion of a proof-of-concept study in humans.

NGM386 and NGM395 were both licensed to Merck at the inception of our collaboration with Merck, and substantially all of the related research and development expenses were borne directly by Merck under our collaboration agreement; however, on March 1, 2019, Merck notified us of its intent to terminate its license, effective May 31, 2019. Upon termination of the license, we will regain full rights to NGM386 and NGM395. We may incur further research and development expenses following our assessment of the suitability of this program for further development.

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Our research and development expenses related to the development of NGM282, NGM313, NGM120, NGM217 and NGM621 consist primarily of:

The process of supplying materials for, and conducting, preclinical studies and clinical trials necessary to obtain regulatory approval of our product candidates is costly and time consuming. We may never succeed in achieving marketing approval for our product candidates. The success of each product candidate may be affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability, our sales capabilities, our ability to work effectively with our collaboration partners, regulatory matters, third-party payor matters and commercial viability.

The following is a comparison of research and development expenses for the years ended December 31, 2017 and 2018:

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 the period, if any, in which material net

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cash inflows from these product candidates may commence. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:

A change in the outcome of any variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory 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.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation. Other significant costs include legal fees relating to patent and corporate matters, facility costs not otherwise included in research and development expenses and fees for accounting and other consulting services.

We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities and potential commercialization of our product candidates. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses. Additionally, we anticipate increased 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 insurance and investor relations costs. In addition, we may incur expenses associated with building a commercial organization in connection with, and prior to, potential future regulatory approval of our product candidates.

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Results of Operations

Comparison of the Years Ended December 31, 2017 and 2018

The following table summarizes our results of operations for the years ended December 31, 2017 and 2018:

Total Related Party Revenue.    Total related party revenue was $77.1 million and $108.7 million for the years ended December 31, 2017 and 2018, respectively, of which $18.8 million in both periods was related to the partial recognition of the upfront payment from Merck in 2015. The increase of $31.5 million in total revenue was due to an additional $20.0 million of revenue in 2018 recognized from the $20.0 million received from Merck to license NGM313 and related compounds and an increase in both reimbursable personnel related expenses and higher overall external research and development expenses that we incurred in 2018.

Research and Development Expenses.    Research and development expenses were $79.7 million and $95.7 million for the years ended December 31, 2017 and 2018, respectively. The increase in research and development expenses of $16.0 million was primarily attributable to an increase of $10.2 million in unallocated research and development expenses, primarily related to hiring- and personnel-related expenses and early research testing, and $6.6 million in the NGM621 program external expenses primarily related to manufacturing costs of clinical materials. These increases were offset by a decrease of $1.0 million in the NGM217 program external expenses for manufacturing costs of clinical materials that occurred in 2017.

General and Administrative Expenses.    General and administrative expenses were $14.8 million and $17.3 million for the years ended December 31, 2017 and 2018, respectively. The increase in general and administrative expenses of $2.4 million was primarily due to an increase of $2.8 million in personnel-related expenses, $0.7 million for increased rent expense and increases in professional fees and contract services expenses, including $0.4 million for legal expenses and $0.4 million in audit and tax expenses. These increases were offset by an increase of $1.9 million in allocated overhead expenses from general and administrative expenses to research and development expenses.

Interest Income.    Interest income was $2.4 million and $3.6 million for the years ended December 31, 2017 and 2018, respectively. The increase in interest income of $1.2 million was

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primarily attributable to higher yields on our available-for-sale marketable securities in 2018 compared to 2017.

Benefit from Income Taxes.    Benefit from income taxes was $1.1 million and $0.0 million for the years ended December 31, 2017 and 2018, respectively. The benefit from income taxes in 2017 was due to a federal alternative minimum tax credit carryforward that became refundable as a result of the Tax Cuts and Jobs Act of 2017.

Liquidity and Capital Resources

We have incurred losses and negative cash flows from operating activities since our inception. As of December 31, 2018, our operations have been financed primarily through the private placement of convertible preferred stock totaling $294.9 million, upfront license fees paid by collaboration partners of $123.0 million and research and development funding provided by collaboration partners of $239.2 million. As of December 31, 2018, we had cash and cash equivalents of $56.9 million, short-term marketable securities of $149.7 million, working capital (excluding deferred revenue) of $192.1 million and an accumulated deficit of $147.2 million, compared to cash and cash equivalents of $25.6 million, short-term marketable securities of $148.1 million, working capital (excluding deferred revenue) of $160.0 million and an accumulated deficit of $146.7 million at December 31, 2017. The change from 2017 to 2018 is primarily attributed to the receipt of $20.0 million from Merck in December 2018 for the license of NGM313.

We anticipate that we will continue to incur net losses for the foreseeable future as we continue the development of our product candidates, expand our corporate infrastructure, including the costs associated with becoming a public company, and conduct pre-commercialization activities. We will require substantial additional capital to achieve our development and commercialization goals for NGM282, for any Merck licensed programs that we opt to co-develop and for any programs that Merck does not opt to develop and that we choose to develop and for any programs for which Merck elects to terminate its license, including NGM386 and NGM395, for which Merck has given us notice of its intent to terminate the license and that we are considering whether to advance pending study results. If our Merck collaboration were to be terminated, we could require significant additional capital in order to proceed with development and commercialization of our product candidates, or we may require additional partnering in order to help fund such development and commercialization. We plan to continue to fund our operations and capital funding needs through public or private equity or debt financings, government or other third-party funding, collaborations, strategic alliances and licensing arrangements or a combination of these. The sale of convertible debt or additional equity could result in additional dilution to our stockholders. Incurring indebtedness would result in debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in the amounts we need or on terms acceptable to us, if at all. If we are not able to secure adequate additional funding we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible and/or suspend or curtail planned programs. Any of these actions could materially harm our business, results of operations and future prospects.

We believe that our existing cash and cash equivalents, along with amounts available to us under our collaboration agreement with Merck will be sufficient to meet our anticipated cash requirements for at least the next 12 months. However, 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.

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Cash Flows

The following table shows a summary of our cash flows for the years ended December 31, 2017 and 2018 (in thousands):

Cash Provided by (Used in) Operating Activities

During the year ended December 31, 2018, cash used in operating activities was $7.6 million, which consisted of a net loss of $0.5 million, adjusted for non-cash charges of $16.5 million and cash used through changes in operating assets and liabilities of $23.6 million. The non-cash charges consisted primarily of stock-based compensation expense of $10.0 million and depreciation expense of $7.2 million. The change in operating assets and liabilities was primarily due to an increase in receivable from related party collaboration of $3.7 million under our agreement with Merck, an increase in prepaid expenses and other current assets of $4.4 million, offset by increases in accounts payable and accrued expenses and other current liabilities of $3.5 million and $4.1 million, respectively, and decreases in deferred rent and deferred revenue of $2.0 million and $21.1 million, respectively. The decrease in deferred revenue is primarily due to the recognition of upfront fees from Merck and the timing of advance payments from Merck related to the reimbursement of costs associated with research and development activities.

During the year ended December 31, 2017, cash used in operating activities was $17.4 million, which consisted of a net loss of $14.2 million, adjusted for non-cash charges of $14.5 million and cash used through changes in operating assets and liabilities of $17.7 million. The non-cash charges consisted primarily of stock-based compensation expense of $7.7 million and depreciation expense of $6.4 million. The change in operating assets and liabilities was primarily due to an increase in prepaid expenses and other assets of $1.1 million primarily resulting from a federal tax receivable generated as a result of the Tax Cuts and Jobs Act of 2017 that was signed into law in December 2017, a decrease in accounts payable of $4.2 million and a decrease in deferred revenue of $16.5 million due to the recognition of revenue related to upfront fees from Merck and the timing of advance payments from Merck related to the reimbursement of costs associated with research and development activities. This was partially offset by a decrease in receivable from related party collaboration of $2.8 million due to payments received from Merck under the collaboration agreement and an increase in accrued expenses and other liabilities of $2.6 million resulting primarily from the timing of payments related to our clinical trial expenses and other research and development activities.

Cash Provided by (Used in) Investing Activities

During the year ended December 31, 2018, cash provided by investing activities was $38.7 million, which consisted of $178.2 million in proceeds from the maturities of marketable securities, partially offset by purchases of marketable securities of $133.6 million and purchases of property and equipment of $5.8 million.

During the year ended December 31, 2017, cash used in investing activities was $2.8 million, which consisted of $217.3 million in purchases of marketable securities and purchases of property and

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equipment of $6.4 million, partially offset by proceeds from the maturities of marketable securities of $220.9 million.

Cash Provided by Financing Activities

During the year ended December 31, 2018, cash provided by financing activities was $0.2 million, which consisted proceeds from the issuance of common stock upon the exercise of previously granted stock options of $2.6 million less deferred initial public offering costs of $2.2 million and repurchases of common stock of $0.2 million.

During the year ended December 31, 2017, cash provided by financing activities was $0.3 million, which consisted of proceeds from the issuance of common stock upon the exercise of previously granted stock options.

Off-Balance Sheet Arrangements

We currently have not entered into and do not have any relationships with unconsolidated entities or financial collaborations, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purpose.

Contractual Obligations

Our principal obligations consist of the operating lease for our facilities and non-cancelable purchase commitments with contract manufacturers or service providers. The following table sets out, as of December 31, 2018, our contractual obligations due by period (in thousands):

We enter into agreements in the normal course of business with contract research organizations for clinical trials and with vendors for preclinical studies and other services and products for operating purposes that are cancelable at any time by us, generally upon 30 days’ prior written notice. These payments are not included in this table of contractual obligations.

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 or in the contractual obligations table above.

Quantitative and Qualitative Disclosures about Market Risk

Our cash, cash equivalents and marketable securities as of December 31, 2018 consisted of readily available checking and money market funds, as well as available-for-sale securities. Our

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primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the nature of the instruments in our portfolio, a sudden change in market interest rates would not be expected to have a material impact on our financial condition or results of operations. We believe that our exposure to interest rate risks is not significant and that a hypothetical 10% movement in market interest rates would not have a significant impact on the total value of our portfolio or our interest income. We do not believe that our cash, cash equivalents or marketable securities have significant risk of default or illiquidity. While we believe our cash, cash equivalents and marketable securities do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash, cash equivalents and marketable securities at one or more financial institutions that are in excess of federally insured limits.

We are also exposed to market risk related to changes in foreign currency exchange rates, mainly relating to our Australian subsidiary. In addition, we contract with vendors that are located in Asia and Europe, and the payments under such contracts are denominated in foreign currencies. We are subject to fluctuations in foreign currency rates in connection with these agreements. We do not currently hedge our foreign currency exchange rate risk. As of December 31, 2017 and 2018, our liabilities denominated in foreign currencies were not material. A 10% increase or decrease in current exchange rates would not have a material effect on our financial results.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our consolidated financial statements, as well as revenue and expenses during the reported periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 1 to our consolidated financial statements appearing elsewhere in this prospectus. We believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Revenue Recognition

All of our revenue to date has been generated from our collaboration agreements. Revenue from collaboration agreements may include non-refundable upfront license fees, partial or complete reimbursement of research and development costs, contingent consideration payments based on the achievement of defined collaboration objectives and royalties on sales of any commercialized products.

Revenues from research activities made under collaboration arrangements are recognized when there is persuasive evidence that an arrangement exists, services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Revenue generated from our collaboration arrangements is not subject to repayment. Our obligations under collaboration agreements may include the transfer of intellectual property rights in the form of licenses, obligations to

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provide research and development services and obligations to participate on certain development committees with the collaboration party. We make judgments that affect the period over which we recognize revenue. On a quarterly basis, we review our estimated period of performance for our collaboration and license revenue based on the progress under the arrangement and account for the impact of any changes in estimated periods of performance on a prospective basis. We record amounts received prior to satisfying the above revenue recognition criteria as deferred revenue until all applicable revenue recognition criteria are met. Deferred revenue represents the portion of research or license payments received that have not been earned.

For revenue agreements with multiple-element arrangements, such as license and development agreements, we allocate revenue to each non-contingent element based on the relative selling price of each element. When applying the relative selling price method, we determine the selling price for each deliverable using vendor-specific objective evidence or third-party evidence. If neither exists, we use the best estimate of selling price for that deliverable. Revenue allocated is then recognized when the four basic revenue recognition criteria are met for each element.

Payments that are contingent upon the achievement of a substantive milestone are recognized entirely as revenue in the period in which the milestone is achieved. A milestone is defined as an event: (a) that can only be achieved based in whole or in part on either (1) the entity’s performance or (2) on the occurrence of a specific outcome resulting from the entity’s performance; (b) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved; and (c) that would result in additional payments being due to the entity. A milestone is considered substantive if the consideration earned from the achievement of the milestone meets all of the following criteria: (a) the consideration is commensurate with either (1) the entity’s performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone; (b) the consideration relates solely to past performance; and (c) the consideration is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement. To the extent that non-substantive milestones are achieved and we have remaining performance obligations, payments in respect of such milestones are deferred and recognized as revenue over the estimated remaining period of performance. If there were no remaining performance obligations, we would recognize the revenue in the period it is earned.

Payments related to options to license our program candidates are considered substantive if, at the inception of the arrangement, we are at risk as to whether the collaboration partner will choose to exercise the option. Factors that we consider in evaluating whether an option is substantive include the overall objective of the arrangement, the benefit the collaborator might obtain from the arrangement without exercising the option, the cost to exercise the option and the likelihood that the option will be exercised. For arrangements under which an option is considered substantive, we do not consider the item underlying the option to be a deliverable at the inception of the arrangement and the associated option fees are not included in allocable arrangement consideration, assuming the option is not priced at a significant and incremental discount. Conversely, for arrangements under which an option is not considered substantive or if an option is priced at a significant and incremental discount, we would consider the item underlying the option to be a deliverable at the inception of the arrangement and a corresponding amount would be included in allocable arrangement consideration.

Revenues related to research collaboration services and grants are recognized as research costs are incurred, and/or the underlying services are performed over the term as specified in the related agreements.

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Accrued Research and Development Expenses

As part of the process of preparing financial statements, we are required to estimate and accrue expenses, the largest of which are research and development expenses. This process involves:

Examples of estimated research and development expenses that we accrue include:

We base our expense accruals related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and clinical research organizations that conduct and manage clinical studies 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.

To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, we cannot assure you 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 studies and other research activities.

Stock-Based Compensation

Stock-based compensation expense represents the grant date fair value of employee stock option grants recognized over the requisite service period of the awards (usually the vesting period) on a straight-line basis, net of estimated forfeitures.

We account for stock options granted to non-employees using the fair value approach. These options are subject to periodic revaluation to reflect the current fair value at each reporting period until the non-employee completes the performance obligation or the date on which a performance commitment is reached.

We calculate the fair value of stock-based compensation awards using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of subjective assumptions,

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including stock price volatility, the expected life of stock options, risk free interest rate and the fair value of the underlying common stock on the date of grant. Our key assumptions are:

We recorded stock-based compensation expense of $7.7 million and $10.0 million for the years ended December 31, 2017 and 2018, respectively. As of December 31, 2018, we had unrecognized stock-based compensation cost related to options granted to employees and directors of $16.7 million, net of forfeitures, which is expected to be recognized as expense over approximately 2.79 years.

Historically, the fair value of the common stock underlying our share-based awards was estimated on each grant date by our board of directors. In order to determine the fair value of our common stock underlying option grants, our board of directors considered, among other things, timely valuations of our common stock prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Given the absence of a public trading market for our common stock, our board of directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair value of our common stock, including our stage of development; progress of our research and development efforts; the rights, preferences and privileges of our convertible preferred stock relative to those of our common stock; equity market conditions affecting comparable public companies; and the lack of marketability of our common stock.

We have utilized the probability-weighted expected return method, or PWERM, alone or in combination with the option pricing method, or OPM, as a hybrid method, or Hybrid Method, each an accepted valuation method under the AICPA Practice Guide, for determining the fair value of our common stock. The PWERM is a scenario-based analysis that estimates the value per share of common stock based on the probability-weighted present value of expected future equity values for the common stock, under various possible future liquidity event scenarios, in light of the rights and preferences of each class and series of stock, discounted for a lack of marketability. The OPM values each equity class by creating a series of call options on the equity value, with exercise prices based on the liquidation preferences, participation rights and strike prices of derivatives. The Hybrid Method is appropriate for a company expecting a near term liquidity event, but where, due to market or other factors, the likelihood of completing the liquidity event is uncertain. The Hybrid Method considers a company’s going concern nature, stage of development and the company’s ability to forecast near and long-term future liquidity scenarios. In connection with our preparation for filing a registration statement with the SEC, we evaluated whether or not in retrospect the valuation of our common stock as of the date of each option grant over the previous 12 months was appropriate for accounting purposes.

The dates of our contemporaneous valuations have not always coincided with the dates of our stock option grants. In determining the exercise prices of the stock options, our board of directors

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considered, among other things, the most recent contemporaneous valuations of our common stock and our assessment of additional objective and subjective factors we believed were relevant as of the grant date. The additional factors considered when determining any changes in fair value between the most recent contemporaneous valuation and the grant dates included our stage of research and development, our operating and financial performance and current business conditions.

After the completion of this offering, the fair market value of each share of underlying common stock will be determined based on the closing price of our common stock as reported by the Nasdaq Global Select Market on the date of grant.

Based on the initial public offering price of $16.00 per share, the intrinsic value of stock options outstanding at December 31, 2018 was $99.4 million, of which $75.1 million and $24.4 million related to stock options that were vested and unvested, respectively, at that date.

JOBS Act Accounting Election

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies may delay the adoption of new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards would otherwise apply to private companies.

The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition time to comply with new or revised accounting standards as applicable to public companies. We are choosing to elect the extended transition period for complying with new or revised accounting standards applicable to public companies. We have elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earlier to occur of (1) (a) the last day of the fiscal year following the fifth anniversary of the completion of this offering, (b) the last day of the fiscal year in which our annual gross revenue is $1.07 billion or more, or (c) the date on which we are deemed to be a “large accelerated filer,” under the rules of the SEC, which means the market value of our equity securities that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Newly Issued Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict 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. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The ASU’s effective date will be for annual reporting periods beginning after December 15, 2018 and interim periods

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beginning after December 15, 2019 using one of two retrospective application methods. The Company has engaged outside advisors to assist in analyzing its research collaboration, product development and license agreement with Merck to determine the differences in the accounting treatment under ASU 2014-09 compared to the current accounting treatment. The consideration the Company is eligible to receive under this agreement includes upfront payments, research and development funding, option payments, milestone payments, and royalties. The new revenue recognition standard differs from the current accounting standard in many respects, such as in the accounting for variable consideration and the measurement of progress toward completion of performance obligations. The Company currently anticipates adopting the new standard effective January 1, 2019 under the modified retrospective method.

In February 2016, the FASB issued ASU No. 2016-02, Leases (ASU 2016-02). ASU 2016-02 is aimed at making leasing activities more transparent and comparable, and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. ASU 2016-02 is effective for all annual reporting periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently assessing the timing of adoption and the impact that the adoption of ASU 2016-02 will have on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718)—Improvements to Employee Share Based Payment Accounting as part of the FASB simplification initiative. The new standard provides for changes to accounting for stock compensation including 1) excess tax benefits and tax deficiencies related to share based payment awards will be recognized as income tax expense in the reporting period in which they occur; 2) excess tax benefits will be classified as an operating activity in the statement of cash flows; 3) the option to elect to estimate forfeitures or account for them when they occur; and 4) increase tax withholding requirements threshold to qualify for equity classification. The Company adopted ASU 2016-09 as of January 1, 2018; however, there was no impact on the Company’s consolidated financial statements as a result of adopting ASU 2016-09.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230)— Restricted Cash, to clarify the presentation of the change in restricted cash on the statement of cash flows. The new standard clarifies the FASB’s position that changes to restricted cash are not reflective of an entity’s operating, investing or financing activities, and therefore should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2018. The Company elected to early adopt this ASU for the year ended December 31, 2018, noting no impact of this ASU on the presentation of its consolidated statement of cash flows due to no changes in restricted cash during the year.

In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope Modification Accounting. ASU 2017-09 defines which changes to the terms or conditions of a share-based payment award require the Company to apply modification accounting. The Company adopted ASU 2017-09 on January 1, 2018; however, there was no impact on the Company’s consolidated financial statements as a result of adopting ASU 2017-09.

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Non-Employee Share-Based Payment Accounting as part of the FASB simplification initiative. The new standard expands the scope of Topic 718, allowing the Company to apply the requirements of Topic 718 to certain non-employee awards to acquire goods and services

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from non-employees. This ASU will be effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently assessing the timing of adoption and the impact that the adoption of ASU 2018-07 will have on its consolidated financial statements and related disclosures.

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when then collaborative arrangement participant is a customer in the context of a unit of account. In those situations, all the guidance in Topic 606 should be applied, including recognition, measurement, presentation, and disclosure requirements. This ASU adds unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606, and requires that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. This ASU will be effective for the Company for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The Company is currently assessing the impact of this ASU on its consolidated financial statements.

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BUSINESS

Overview

We are a clinical-stage biopharmaceutical company developing novel therapeutics based on our scientific understanding of key biological pathways underlying cardio-metabolic, liver, oncologic and ophthalmic diseases. These diseases are among the largest unmet medical needs globally and represent leading causes of morbidity and mortality and a significant burden for healthcare systems. Since the commencement of our operations in 2008, we have generated a robust portfolio of seven product candidates, five of which are in clinical testing. Our most advanced product candidate, NGM282, is wholly-owned and will enter Phase 2b development for the treatment of non-alcoholic steatohepatitis, or NASH, in mid-2019. In an ongoing Phase 2 clinical trial, NGM282 demonstrated the ability to rapidly improve NASH and reverse liver fibrosis at 12 weeks. We have created this portfolio using our research and drug discovery approach that employs unbiased, in vivo-based discovery to identify proprietary insights into critical biological processes. We combine this approach with our protein and antibody engineering expertise to find the appropriate modality to enhance each product candidate’s therapeutic potential. Our executives, directors and advisors have extensive track records of successfully discovering, developing and delivering to patients first-in-class drugs, which positions us well to maximize the potential of our drug discovery approach.

In 2015, we entered into a five-year research collaboration, product development and license agreement with Merck Sharp & Dohme Corp., or Merck. On March 15, 2019, Merck exercised its option to extend the collaboration for two additional years. The collaboration includes an exclusive worldwide license to our growth differentiation factor 15, or GDF15, program. On March 1, 2019, Merck notified us of its intent to terminate its license to the program, effective May 31, 2019. Under the collaboration agreement, we also granted Merck options to take exclusive, worldwide licenses for the programs in our research and development pipeline on a program-by-program basis. Merck generally has a one-time right to exercise its option when a program completes a human proof-of-concept trial. In November 2018, Merck exercised its option to license NGM313, an agonistic antibody selectively activating fibroblast growth factor receptor 1c-beta-klotho, or FGFR1c/KLB, which is a potential treatment for NASH and type 2 diabetes. The collaboration enables us to develop more product candidates for major indications than we could likely advance on our own, with Merck bearing a majority of the associated cost and risk. We retain an option, when a candidate has advanced to Phase 3 clinical trials, to participate in up to 50% of the economic return from that candidate if it becomes an approved medicine. Overall, the Merck collaboration provides us with robust research and development support, while we retain our research independence and the option to split costs and profits on product candidates Merck elects to advance. We excluded our fibroblast growth factor 19, or FGF19, program, including NGM282, from the agreement and it remains wholly-owned by us.

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Our most advanced programs have focused on novel discoveries in hormone pathways that regulate cardio-metabolic processes and liver function, including those driving NASH, type 2 diabetes and obesity. We have identified multiple hormone pathways of interest, the most advanced of which are: FGF19 which plays a critical role in controlling bile acid, lipid and glucose metabolism; FGFR1c/KLB, which regulates insulin sensitivity, blood glucose and liver fat; and GDF15, which drives profound metabolic activity by regulating fuel flux and has been considered a challenging therapeutic target. We believe these hormone pathways work through distinct mechanisms and play an important role in metabolic regulation. Our seven proprietary product candidates are summarized below.

We are currently focused on the following programs:

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Using our drug discovery approach, we have identified and are actively investigating over ten additional biological pathways with potential to intervene in disease. For these pathways, we are further identifying mechanistic insights and their relevance to human biology, and generating biologic drug candidates that appropriately modulate the signals we have identified. These programs are in various stages of development, ranging from functional validation to lead candidate generation. Discovery activity in selected therapeutic areas beyond cardio-metabolic, liver, oncologic and ophthalmic diseases is ongoing and in various stages of research.

Our management, scientists, board members and advisors have long track records of identifying multiple, class-defining drugs with meaningful clinical and commercial impact. Our scientific values and guiding principles have grown out of our team’s experience and involvement at companies that have built prolific drug discovery and development platforms, particularly Amgen Inc., Genentech, Inc. and Tularik Inc. We believe that this collective experience uniquely positions our team to execute on our strategy.

Our Strategy

Our strategy is to leverage our biology-centric drug discovery approach to uncover novel mechanisms of action and generate proprietary insights that will enable us to move rapidly into proof-of-concept studies and deliver to patients first-in-class medicines. Key elements of our strategy are:

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Our Approach to Drug Discovery and Development

We pursue drug discovery and development through a multi-step process geared towards translating powerful human biology into first-in-class medicines. Our founding team designed our approach based on many decades of experience in successful drug development at other companies, including Amgen, Genentech and Tularik. Our process pairs a research approach that generates novel insights into pathways demonstrating powerful biological effect with the expertise in protein and antibody engineering to transform those insights into product candidates. This process seeks to address the challenges in drug discovery in diseases that involve complex, integrated biological pathways.

Identifying Pathways of Interest

We identify target genes or pathways of interest by utilizing three approaches:

We then characterize and confirm the effects of modulating the biological activity of these potential targets using in vivo models designed to mimic the disease of interest. We interrogate the biological activity of candidate targets using in vivo models because in vitro experiments, which take place outside a living organism, are not capable of adequately reflecting complex biological processes and interactions that are regulated by multi-organ systems. Historically, in vivo screening at a scale and speed for drug discovery has not been practical as it has largely been dependent on generating purified protein for functional testing. We use recombinant adeno-associated virus, or rAAV, vectors, a proven research tool that can introduce the gene of interest directly into disease models to enable the biological function of the resultant protein to be assessed in vivo. With this rAAV technology, we initially developed an unbiased, in vivo functional evaluation system that formed the foundation of our

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discovery efforts in cardio-metabolic disease and enabled us to identify novel pathways that demonstrate profound metabolic effects. In addition, we utilize in vivo models with loss of function mutations or knockouts to understand the function of certain human genes as they relate to the disease of interest. By employing these approaches in animal models of human diseases, we can elucidate the biology of potential human drug targets in a relevant in vivo setting and evaluate their impact on the manifestation and progression of disease.

Translation of Pathway Biology to Product Candidates

Once a strong indication of biological activity is generated for a protein of interest, we employ a differentiated process aimed at quickly identifying a lead candidate to enable us to rapidly advance the program to evaluate the effect of these product candidates on biomarkers of disease or target activity in order to enable early demonstration of human proof of concept. We probe the mechanism of action, signaling pathways and the relationship between the protein structure and function to help inform how to translate the biological activity into a potential product candidate. Through these activities we have been able to identify novel interaction partners, their expression patterns and their signaling activities, which help elucidate biological mechanisms and inform selection of a lead candidate. We leverage our expertise in protein and antibody engineering to translate biological signals into differentiated product candidates. We have an unbiased antibody generation technology, along with an armamentarium of therapeutic protein and antibody engineering capabilities, including bispecific antibodies, bifunctional antibody fusions and methods for extending the half-lives of native proteins. This range of potential modalities not only allows us to generate a portfolio of product candidates from which to select a lead, but also provides important tools to define the biological activity of the candidates.

After we have identified a lead candidate in a program, we design our early clinical trials to provide proof of biological activity, in addition to assessing safety and tolerability, to determine whether the activity we have observed in animal models can be translated into human subjects. We believe our deep understanding of the fundamental biological mechanisms observed for our chosen development candidates and the specific relationship between structure and pharmacological function distinguishes our drug discovery approach from many others applied in our industry today.

The cornerstone of our research and development approach is the experienced and talented team of scientists and drug developers who built and run it. A common theme in our team’s expertise is the ability to translate biological signals in animal models into drugs with human activity. Members of our team played significant roles at prior companies in discovering and developing multiple approved drugs, including recombinant human insulin, human growth hormone, tissue plasminogen activator and interferon alpha and gamma, as well as metreleptin and evolocumab (Repatha^®). Our team seamlessly integrates discovery biology, protein and antibody engineering, preclinical development, early clinical development and manufacturing for each program. Our scientific advisory board further strengthens our experience base and includes key contributors to the discovery of the statin class of drugs, as well as thought leaders in new areas complementary to our early-stage research efforts.

Our Initial Focus on Cardio-Metabolic and Liver Disease

Cardio-metabolic and liver diseases, including NASH, diabetes and obesity, are among the largest unmet medical needs globally, and represent a leading cause of morbidity and mortality, a significant burden for healthcare systems and an area of relative underinvestment by the pharmaceutical industry. Metabolic syndrome is exhibited by 34% of adults in the United States and is believed to be at the center of this health epidemic. Metabolic syndrome comprises a constellation of co-morbid conditions, including type 2 diabetes, obesity, high blood pressure, poorly regulated lipids and NAFLD, a precursor condition to NASH. Despite a wave of public health campaigns to promote

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better diet and exercise habits and a range of treatment options available for many of these cardio-metabolic diseases, morbidity and mortality rates remain high and more effective therapeutics are needed.

Cardio-metabolic and liver diseases represent areas of both rapidly growing unmet medical need and underinvestment, driven in part by the biological complexity of the diseases and the substantial costs necessary to develop new therapeutics. Leveraging our differentiated drug discovery approach, we have spent the last decade discovering and developing a portfolio of clinical-stage drug candidates that target various forms of cardio-metabolic disease including NASH, type 2 diabetes and obesity. Each of these drug candidates stem from novel insights we have made in understanding hormone pathways that regulate cardio-metabolic processes. NGM282 is our lead product candidate in development for treating NASH, a cardio-metabolic liver disease. As explained below, the clinically validated, dual mechanism of action of NGM282 supports its therapeutic potential in NASH, an indication with a high prevalence and for which there are no approved treatments. Our investment in cardio-metabolic diseases was further expanded in 2015 through our collaboration with Merck, which provided resources to advance multiple programs, in addition to our wholly-owned NGM282 program. Our six most advanced clinical candidates—NGM282, NGM313, NGM386, NGM120, NGM217 and NGM395—are notable because their preclinical profiles suggest the potential to broadly impact the drivers of various diseases with an underlying metabolic dysregulation. These programs are in human clinical trials or preparing to enter human clinical trials.

Other Focus Areas

Beyond cardio-metabolic and liver diseases, we are also pursuing treatments for oncologic and ophthalmic diseases, which are also major disease categories that are growing in incidence and lack adequate treatments. NGM120 is our first product in oncology and NGM621 is our first product candidate in ophthalmic disease. All of our programs embody our focus on delivering transformative therapeutics to patients by applying our proprietary insights into powerful biology underlying major diseases.

Our Programs

NGM282: A Rapid and Potent Approach to Treating NASH

NGM282, an engineered version of human hormone FGF19 that is administered through a once daily subcutaneous injection, has demonstrated the ability to rapidly improve NASH and reverse liver fibrosis in clinical and preclinical studies. We believe the combination of breadth, magnitude and speed of effect demonstrated by NGM282 in these studies results in an agent that, if ultimately approved, could provide a needed medicine for physicians to treat NASH patients with moderate to advanced fibrosis. We have tested NGM282 in over 400 subjects, including more than 150 NASH patients, and we expect to initiate a Phase 2b clinical trial in NASH patients in mid-2019. NGM282 is wholly-owned, and it is not subject to our collaboration with Merck.

NASH: A Progressive Metabolic and Fibrotic Disease of the Liver that Affects Millions

NASH is a life threatening form of liver disease. It results from the progression of NAFLD, which is a common co-morbidity of the metabolic syndrome and obesity. NAFLD is characterized by abnormal amounts of fat in the liver, a condition known as steatosis, and is often associated with insulin resistance. This abnormal fat in the liver contributes to the progression by 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 liver failure, also known as cirrhosis.

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The estimated global prevalence of NAFLD and NASH has risen rapidly in parallel with the dramatic rise in population levels of obesity and diabetes. NAFLD now represents the most common cause of liver disease in the Western world. In the United States alone, the prevalence of NASH was estimated to total 16.5 million cases and is projected to reach 27 million cases by 2030, with similar trends occurring globally. By 2020, NASH is expected to supplant hepatitis C as the leading cause for liver transplantation, and liver-related deaths in the NAFLD population are expected to increase by more than 150% in the next 15 years. The annual economic burden associated with NAFLD and NASH in the United States was estimated to have been over $100 billion in 2016.

Although the mechanism underlying the development and progression from simple steatosis to NASH and cirrhosis is poorly understood, insulin resistance and inflammatory mediators, including lipotoxicity, cytokines and oxidative stress, are believed to promote the development of NASH and its extrahepatic complications. Excess lipotoxic, or fat, metabolites in the liver are believed to provide the primary insult in the pathogenesis of NASH, and several treatments are in development targeting mechanisms to reduce these disease drivers. Other treatments in development aim to reduce the inflammatory and fibrotic damage created by this metabolic dysregulation. Evidence also supports a role for bile acids in the pathogenesis of liver inflammation and fibrosis. Accumulation of bile acids, in particular, more toxic hydrophobic bile acids, within hepatocytes can cause mitochondrial dysfunction, endoplasmic reticulum stress and immune cell infiltration that can ultimately lead to inflammation, cell death and liver injury.

Most patients with NASH are diagnosed in their forties or fifties, however, NASH develops across all ages, including in children, which is thought to be linked to an increase in childhood obesity. Most NASH patients are asymptomatic, although some may present with fatigue, malaise and vague right-upper abdominal discomfort. Patients are more likely to be initially identified by elevated liver aminotransferases on routine lab tests or hepatic steatosis detected incidentally on abdominal imaging. While non-invasive diagnostic tools are under development, a definitive diagnosis of NASH is currently only achievable through liver biopsy to assess the components of the NAFLD activity score, or NAS.

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The histologic criteria for the diagnosis of adult NASH include steatosis, lobular inflammation and hepatocellular ballooning. Portal and periportal fibrosis followed by bridging fibrosis and cirrhosis are seen in patients as NASH progresses. Physicians assess the severity of NASH by liver biopsy using two different scoring systems, the NAS and the fibrosis stage (F0 to F4). The table below describes the scoring criteria of the two systems:

NAFLD Activity Score System

Fibrosis Score

The NAS is a validated score of liver histology that is used to grade disease activity in patients with NAFLD and NASH. The NAS is the sum of the liver biopsy’s individual scores for steatosis (0–3), lobular inflammation (0–3) and hepatocellular ballooning (0–2), with fibrosis (F0–F4) scored separately. Advanced liver fibrosis is generally considered fibrosis stage F3 and F4, which may ultimately lead to end-stage liver disease, liver cancer, liver transplant and/or death.

FDA Draft Industry Guidance on NASH Drug Development and Endpoints

There are no FDA-approved therapeutics for NASH. The FDA has provided draft industry guidance to the industry regarding acceptable development pathways for investigational NASH agents as follows:

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We believe many agents in development for NASH will opt for a Subpart H/E pathway and rely on the surrogate endpoints for initial approval. As detailed further below, fibrosis stage is currently the only measurement that is correlated to liver outcomes and therefore, the potential for many agents that will rely only on the resolution of NASH surrogate endpoint to demonstrate clinical benefit will remain uncertain until a confirmatory outcomes study is successfully completed.

Stage of Fibrosis Predictive of Outcomes for NASH Patients

The presence of fibrosis is the only factor that is highly predictive in identifying those patients who will progress to cirrhosis. The natural history of NASH is variable from patient to patient and, while the NAS is a valuable tool for diagnosing the disease, it does not appear to be predictive of disease progression. Of the estimated 64 million patients in the United States with NAFLD, approximately 10%–20% will progress to NASH over time. Of these NASH patients, approximately 10%–15% will progress to cirrhosis by advancing one fibrosis stage every seven years. The mortality rate of NASH patients with fibrosis has been estimated at 1.5%–3.5% per year, largely due to cardiovascular disease, followed by liver-related causes. However, patients with F2 or greater fibrosis stage have a greater chance of liver-related mortality than cardiovascular-related mortality, and each stage of worsening of fibrosis correlates to an exponential increase in liver-related mortality rates. Patients with F3 fibrosis and F4 fibrosis have an approximately 17 times greater risk and 42 times greater risk, respectively, of liver-related mortality than those NASH patients without fibrosis. Therefore, it is expected that treatments that can drive the regression of fibrosis are more likely to have a meaningful impact on clinical outcomes for NASH patients with F2 to F4 fibrosis.

Current Treatments

Currently, no agents have been approved for the treatment of NASH. Weight loss through diet and lifestyle management is currently considered the first-line treatment strategy for NASH and is

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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

While there are many agents in clinical development for NASH, the landscape can be subdivided into a few mechanistic classes based on the putative disease drivers they target. Most treatment approaches for NASH have focused on the prevention or reversal of liver injury either by predominantly treating the metabolic dysregulation of the disease or through directly targeting inflammatory or fibrogenic pathways. NASH is a chronic, slowly progressing disease and, currently, many believe that slowing the progression or reversing disease requires treatment periods of at least 12 months. To attempt to overcome modest individual agent activity, combination therapy is being pursued by some NASH drug developers, on the theory that the complex underlying pathophysiology of NASH will require targeting multiple mechanisms to achieve a sufficient disease-modifying effect to be clinically relevant.

Drug Candidates Pursuing a Metabolic Approach to Treating NASH

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. The rationale for these treatment candidates is based on an expectation that the improvement of the underlying liver insult of metabolic dysregulation will allow the liver to recover over the long-term, which would potentially allow the liver to repair itself and eventually improve fibrosis. Although clinical data for some compounds in this mechanistic class show a beneficial effect on steatosis and an improvement in the NAS, the effect on fibrosis is likely to be highly dependent on the compound being tested. Any of these metabolic-focused compounds that are ultimately approved may be appropriate to halt the progression of disease in earlier-stage NASH patients or used in combination with other agents. Considering the correlation of liver failure outcomes with fibrosis stage, we believe the NASH patients with moderate to advanced fibrosis (F2 to F4) will require a more potent and fast-acting agent to prevent the progression to end-stage liver disease.

Drug Candidates Pursuing an Anti-Inflammatory and/or Anti-Fibrotic Approach to Treating NASH

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. These classes of compounds have also shown limited ability to improve NASH.

We believe the minimal efficacy on fibrosis improvement and lack of activity on resolving NASH that has been observed to date with anti-inflammatory and anti-fibrotic agents may reflect the difficulty in treating the disease without removing the underlying insult of lipotoxicity, or the challenge of

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impinging on the complex process of hepatocellular death and fibrosis from collagen deposition by intervention through a single pathway.

Drug Candidates with Multiple Mechanisms

To date, drug candidates with multiple mechanisms of activity have shown the most promising effect on NASH. The FXR agonist, obeticholic acid, or OCA, demonstrated improvements in the NAS and fibrosis but not resolution of NASH as defined by the Phase 2 and Phase 3 study protocols. FXR agonists are known to regulate hundreds of genes, and one of the factors upregulated is FGF19. We believe FGF19 is the primary mediator of the activity of FXR agonists in NASH. FXR agonists are limited, however, in the magnitude of FGF19 levels they can achieve by the boundaries of normal physiology. We believe this limitation to sub-pharmacological levels of FGF19 will limit the ability of FXR agonists to produce a meaningful effect in NASH, in the same way that insulin secretagogues have mild activity compared to insulin itself in treating diabetes. Additionally, treatment with OCA has been associated with pruritus, or whole body itching. There are multiple FXR agonists in preclinical or clinical development seeking to improve on the properties of OCA; however, we believe their activity on NASH will be limited by their inability to sufficiently elevate FGF19 levels over a sustained period of time.

To our knowledge, we are the only program in clinical development for NASH directly activating the native FGF19 pathway to drive both a regression of fibrosis and resolution of NASH.

NGM282: A rapid and potent approach to treating NASH

NGM282, an engineered version of human hormone FGF19 that is administered through a once daily subcutaneous injection, has demonstrated the ability to rapidly improve NASH and reverse liver fibrosis in clinical and preclinical studies. We believe the combination of breadth, magnitude and speed of effect demonstrated by NGM282 in these studies results in an agent that, if ultimately approved, could provide a needed medicine for physicians to treat NASH patients with moderate to advanced fibrosis. We have tested NGM282 in over 400 subjects, including more than 150 NASH patients, and we expect to initiate a Phase 2b clinical trial in NASH patients with F2 and F3 liver fibrosis in mid-2019 and a Phase 2b clinical trial in NASH patients with F4 compensated cirrhosis in the second half of 2019. We obtained Fast Track designation for NGM282 for the treatment of NASH and PBC in adults. See “Government Regulation and Product Approval—Accelerated Approval Requirements.” NGM282 is wholly-owned, and it is not subject to our collaboration with Merck.

In a recent study, gastric bypass surgery has led to a resolution of NASH in approximately 80% of patients studied. We initially identified FGF19 using our rodent gastric bypass surgery model that was designed to discover hormones that may drive the beneficial metabolic effects observed following this type of surgery. We also demonstrated that serum levels of FGF19 are significantly increased in humans after gastric bypass surgery. FGF19 acts as an endocrine hormone to regulate systemic carbohydrate and energy homeostasis, similar to insulin, and also inhibit the production of bile acids in the liver. Systemic FGF19 levels are decreased in patients with NASH, type 2 diabetes or metabolic syndrome, and are normalized after gastric bypass surgery in diabetic human subjects.

The spectrum of activities ascribed to FGF19 appear to be mediated primarily through two different receptor complexes: FGFR4/KLB and FGFR1c/KLB. FGFR4/KLB receptor complexes are found primarily in the liver and FGFR1c/KLB receptor complexes are found primarily in adipose tissue and the central nervous system. When activated, FGFR4/KLB inhibits the expression of the cholesterol 7alpha-hydroxylase 1, or CYP7A1, gene, which modulates bile acid production through the classical pathway in the liver. There is increasing evidence supporting the role of bile acids as a pathophysiological driver of NASH. Individuals with NASH are reported to have elevated hepatic and circulating concentrations of bile acids, as well as increased concentrations of fecal and urine bile

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acids. As NASH patients progress to F2 and F3 fibrosis stages, serum levels of bile acids double as compared to healthy volunteers. Furthermore, serum levels of FGF19 are increasingly depressed as fibrosis levels increase in NASH patients as compared to healthy volunteers. A combination of activities from FGFR4/KLB and FGFR1c/KLB are believed to promote multiple beneficial metabolic effects in the liver and systemically, including improved insulin sensitization, a reduction in de novo lipogenesis and an increase in fatty acid oxidation.

We designed NGM282 as an analog of human FGF19 to improve the drug-like properties of the protein, remove a tumorigenic signal observed in rodents and retain the beneficial properties of triggering the FGFR4/KLB and FGFR1c/KLB pathways. We believe this tandem receptor-complex activation enables an improvement in the metabolic function of the liver and reduction in bile acid synthesis, which, in turn, enables NGM282 to have a more rapid and direct impact on fibrosis as compared to other agents that only address the metabolic dysfunction of NASH, as illustrated in the figure below.

Our Extensive Clinical Experience with NGM282

Our clinical development program for NGM282 was designed to first assess safety and tolerability of the agent and then test for activity in humans in a variety of disease settings we believed may benefit from the signaling activity of the FGF19 pathway. Each of these trials has provided insights into the agent’s activity in humans and informed our development plans for NASH. A consistent profile of activity and tolerability has emerged for the compound across these studies.

After a Phase 1 clinical trial to assess safety and tolerability, we conducted a Phase 2 clinical trial in type 2 diabetes patients to assess the impact of NGM282 on insulin resistance and blood glucose levels. Although they were not histologically confirmed for NASH, the characteristics of many of the patients enrolled in this study are consistent with a population of presumptive NASH patients as they

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demonstrated many of the hallmarks of NASH, including elevated levels of the liver transaminases known as alanine transaminase, or ALT, and aspartate transaminase, or AST. This trial validated the metabolic pathways of the drug by demonstrating improvements in many metabolic parameters across the patient population, but did not result in significant blood glucose lowering after 28 days of treatment. A consistent improvement in ALT and AST was observed for patients on treatment with NGM282, which suggested the agent was having a beneficial effect on liver health and, therefore, could have application in the treatment of NASH.

We have also explored the utility of NGM282-mediated bile acid synthesis inhibition in two cholestatic diseases, primary biliary cholangitis, or PBC, and primary sclerosing cholangitits, or PSC, but have decided not to pursue further development of NGM282 in these diseases at this time. Although we do not currently intend to pursue NGM282 for the treatment of PBC or PSC, we previously obtained orphan drug designations for NGM282 for the treatment of PBC in adults in the United States and PBC and PSC in adults in the European Union. See “Government Regulation and Product Approval—Orphan Drug Designation.” Both of these conditions are believed to have a strong bile acid component underlying the disease. NGM282 achieved a significant reduction in alkaline phosphatase, or ALP, an FDA-validated biomarker of disease in PBC, however, we determined the once-daily injectable nature of the product and competitive landscape compared to other development paths for the drug was not optimal. Similarly, in PSC, NGM282 treatment resulted in sustained reductions in a biomarker of fibrogenesis (PRO-C3), although there was no benefit in the primary endpoint of the trial, ALP. The FDA has not provided guidance on a development path for PSC that does not involve ALP and, therefore, we have determined not to move forward in this indication until a clear path is defined. Notably, PSC patients have a normal liver fat content level and the indication of fibrosis improvement in this population supports a role for the activity of a bile acid inhibitor, such as NGM282, as an anti-fibrotic in the liver.

A consistent tolerability observation across each trial has been dose-dependent gastrointestinal, or GI, adverse events that manifest in both the upper and lower GI tract. We conducted a Phase 1b trial in patients with chronic constipation and determined that NGM282 has a pro-kinetic effect on the GI tract, which means the increase in stool frequency is caused by greater GI motility and is not related to elevated fecal fat or elevated bile acid content. These results have helped inform mitigation protocols to help patients lessen these GI side effects.

NGM282 Phase 2 Trial in NASH Patients

Our Phase 2 clinical trial in patients with histologically-confirmed NASH was comprised of an initial double-blind placebo-controlled cohort (cohort 1), followed by a series of adaptive, open-label, single-blind cohorts (cohorts 2 and 3). We are also currently enrolling an additional expansion cohort (cohort 4) under this study to test NGM282 in a double blind, placebo-controlled setting with liver biopsies at baseline and following 24 weeks of treatment. Cohort 1 was designed to measure liver fat content by magnetic resonance imaging proton density fat fraction, or MRI-PDFF, and serum biomarker data at 12 weeks. This portion of the study generated distinct signals of therapeutic benefit and appropriate tolerability characteristics, which subsequently informed the adaptive cohorts 2 and 3. The open-label, single-blind cohorts (cohorts 2 and 3) were designed to explore additional dose levels of NGM282, as well as confirm the impact of NGM282 on liver histology, as defined by improvements in fibrosis and NAS. Additionally, the protocol was amended to study statin use for those patients that experienced a low density lipoprotein, or LDL, cholesterol increase during the first two weeks of NGM282 treatment, as further described below.

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Components of the NGM282 Phase 2 Clinical Trial in NASH

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NGM282 activity has been measured across a variety of imaging and serum biomarker measures, or non-invasive measures, as well as histological measures in order to provide a comprehensive assessment of the drug’s activity on NASH disease pathology. For each of cohorts 1, 2 and 3, the primary endpoint was the absolute change from baseline to week 12 in liver fat content. Responders were defined as patients who achieved a 5% or larger reduction in absolute liver fat content, or LFC, as measured by MRI-PDFF. Key secondary endpoints included assessments of the safety and tolerability, percentage change from baseline (or relative change) in absolute LFC, normalization of LFC to less than 5% and changes from baseline and normalization in ALT and AST. Exploratory endpoints included the evaluation of biomarkers of NASH pathogenesis and fibrosis, as well as assessment of changes in liver histology in a sub-population of patients (3 mg dose group in cohort 2 and 1 mg dose group in cohort 3). The table below summarizes the preliminary data generated to date and demonstrates the consistent effect across each of the non-invasive measure of NASH in each of cohorts 1, 2 and 3 of our Phase 2 clinical trial, followed by a matrix explaining the significance of each of the metrics and biopsy measurements:

NGM282 Significantly Impacts Key Parameters Consistent with Improvements in NASH

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A description of the key non-invasive and histological measurements collected in our NASH Phase 2 clinical trial is included in the table below:

Cohorts 2 and 3, summarized in more detail below, included patients who received liver biopsies after 12 weeks of treatment with either 1 mg or 3 mg of daily NGM282 to enable an assessment of any improvements in histological measures of NASH, such as fibrosis. Preliminary data from both the 3 mg dose group of cohort 2 and the 1 mg dose group of cohort 3 demonstrated that NGM282 has an impact on fibrosis regression in NASH subjects, with 42% and 25%, respectively, registering at least a one-stage improvement in fibrosis. We believe these histology results offer compelling support for NGM282’s potential as a rapidly-acting agent for NASH patients with moderate to advanced fibrosis.

NGM282 Phase 2 Clinical Trial in NASH Patients: Cohort 1

In the double-blind cohort of the Phase 2 clinical trial (cohort 1), 82 subjects with biopsy-confirmed NASH were randomized to NGM282 clinical doses of 3 mg or 6 mg (n = 55) or placebo (n = 27), administered as a daily subcutaneous injection for 12 weeks. Histologic inclusion criteria included biopsy-proven NASH with a NAS ³ 4 (at least 1 point in each component), F1 to F3 fibrosis and ³ 8% LFC.

As published in The Lancet in 2018, significant reductions in absolute and relative LFC were seen with both doses, with 79% of the 6 mg-treated subjects and 74% of the 3 mg-treated subjects meeting the primary endpoint of ³ 5% reduction in absolute LFC as measured by MRI-PDFF. There was no significant difference in absolute LFC reduction between the 3 mg and 6 mg doses. Normalization of absolute LFC (defined as < 5% measured by MRI-PDFF) was observed in 26% and 39% of subjects treated with 3 mg and 6 mg, respectively, at week 12. Over 85% of NGM282 treated subjects achieved a decrease in relative LFC of > 30%, which has been correlated to improvements in histology in several studies. These results were maintained across key baseline characteristics of gender (male vs. female), ethnicity (Hispanic vs. Non-Hispanic), diabetic status, ALT levels (< vs. > 40 U/L), body mass index, or BMI, (< vs. > 30), fibrosis stage (F1 vs. F2/F3) and statin use, with no significant difference in any sub-category.

Greater reductions from baseline in mean absolute ALT levels were observed for both NGM282 3 mg (-35 international units, or IU, p<0.0001) and 6 mg (-32 IU, p<0.0001) clinical doses at week 12 as compared with placebo. The p-value is a measure that states the probability that a comparable or better result would be produced purely by chance. A p-value of less than 0.05 means that if the drug was only as effective as the placebo, there would be less than a 5% chance that a comparable or better result would be produced purely by chance. Differences with a p-value of less than 0.05 are

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generally considered statistically significant, indicating a high degree of confidence that the result is due to therapy with the drug and not due to chance. This decrease in ALT levels achieved statistical significance as early as week one, with a sustained reduction throughout the entire 12-week study treatment period. The mean relative percentage decreases in ALT levels from baseline to week 12 were also significant in both the doses, ranging from 43% to 44% (p<0.001). ALT levels achieved normalization (defined as <19 IU in females and < 30 IU in males) in 24% of NGM282-treated patients by week 2 and 36% of treated subjects by week 12. Similarly, treatment with NGM282 resulted in significant mean absolute reductions in AST levels from baseline to week 12 as compared with placebo, with the majority of subjects decreasing below 40 IU as early as two weeks after starting treatment.

7a-hydroxy-4-cholesten-3-one, or C4, is an intermediate in the classical bile acid synthesis pathway that is produced by the rate-limiting enzyme, CYP7A1. When activated, FGFR4 leads to a reduction in serum C4 levels. C4 levels were measured in patients to track target engagement by NGM282 and to determine how levels of C4 correspond to measures of therapeutic effect, such as reductions in liver transaminase levels. At both the 3 mg and 6 mg dose levels, serum concentrations of C4 were significantly reduced relative to placebo after one week of treatment, with more than 65% of patients at or below the limit of detection in the C4 assay. Levels of liver ALT and AST released from injured or dead hepatocytes are significantly elevated in NASH patients and can be measured as serum biomarkers of liver health. Reductions in serum levels of ALT and AST follow a similar time course as C4 reduction. We believe the potent and sustained inhibitory effect that NGM282 has on the classical bile acid synthesis pathway is important to achieving its therapeutic effect. FXR agonists can only elevate FGF19 to the upper end of normal physiological levels, which we believe is insufficient to achieve the complete and sustained inhibition of the classical bile acid pathway.

PRO-C3 levels, as well as levels of propeptide of type III procollagen, or PIIINP, and TIMP metallopeptidase inhibitor 1, or TIMP-1, which are components of the Enhanced Liver Fibrosis, or ELF, score, were reduced in the treated subjects, supporting a potential anti-fibrotic effect. Notably, more than 74% of NGM282-treated subjects achieved a reduction in PRO-C3 levels of ³15% at 12 weeks, as compared to 24% of placebo-treated subjects. The overall ELF score for the 3 mg- and 6 mg-treated subjects was reduced by an average of 0.3 and 0.2, respectively, compared to no change for the placebo group.

Triglyceride level decreases were consistent with FGFR1c/KLB activity triggered by NGM282, while significant LDL cholesterol increases reflect potent FGFR4/KLB-mediated CYP7A1 inhibition. There were highly significant correlations between decreases in LFC and reductions in the serum levels of ALT, AST and C4.

NGM282 Phase 2 Clinical Trial in NASH Patients: Cohort 2 and 3 Imaging and Biomarker Results

Based on the profound impact seen with NGM282 in NASH patients across the measured non-invasive parameters assessed in cohort 1, an adaptive, open-label, single-blind cohort of three dosing groups known as cohort 2 was added to evaluate: 1) lower doses of NGM282 (0.3 and 1 mg); 2) histologic response at 12 weeks in a 3 mg dose group; and 3) the ability of concomitant statin use to mitigate drug-induced LDL cholesterol elevations. Additional MRI-PDFF images were collected at week 6 to further assess the potential for LFC responses at an earlier point in time and to evaluate the persistence of response at week 18 (six weeks after the end of treatment). The demographics and baseline patient characteristics of cohort 2 were similar to those in cohort 1. Preliminary data for the 3 mg dose in Cohort 2 and 1 mg dose in Cohort 3 include only those patients who completed treatment with paired biopsies at baseline and week 12. Preliminary data from cohort 2 demonstrates that a significant amount of the decrease in LFC occurs by week 6 and further consolidates towards normalization at week 12 in the 1 mg and 3 mg dosing groups. The 1 mg and 3 mg dose groups in

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cohort 2 showed similar reductions of LFC and ALT levels, and were consistent with the week 12 changes observed with the 3 mg dose in cohort 1. Serum levels of C4 were significantly decreased at week 12, with the 3 mg dose group demonstrating reduction of 93% from baseline (p<0.0001). Preliminary data from cohort 2 indicates that the 1 mg and 3 mg dose groups also had statistically significant reductions from baseline in PRO-C3 levels (-4.7 and -11.1 ng/ml, respectively, p<0.05) and PIIINP (-2.0 and -3.3 ng/ml, respectively, p<0.001) and TIMP-1 (-33.1 and -42.7 ng/ml, respectively, p<0.05) components of the ELF score at week 12. The 0.3 mg dose group in cohort 2 demonstrated a reduced treatment response overall as compared to the 1 mg and 3 mg cohorts, based on the reductions in LFC, levels of ALT and the fibrosis markers. Preliminary data indicates that, six weeks after the end of NGM282 treatment, the relative levels of LFC and ALT levels remained suppressed, with reductions approximately 20% to 39% and 18% to 44% below baseline levels across doses evaluated in cohorts 2 and 3, respectively. Similarly, reductions in PRO-C3 levels and ELF score components in NGM282-treated patients were sustained six weeks after the end of NGM282 treatment.

NGM282 Phase 2 Clinical Trial in NASH Patients: Cohort 2 (3 mg) and Cohort 3 Preliminary Histology Results

Liver histology was evaluated at 12 weeks in the 3 mg dosing group of cohort 2 and in the 1 mg dosing group of cohort 3. Each of these cohorts enrolled primarily NASH patients with moderate to advanced fibrosis. Eighty-four percent of the 19 patients in the 3 mg dosing arm of cohort 2 had been diagnosed with F2 or worse fibrosis at baseline. Eighty-three percent of the 24 patients in cohort 3 had F2 or worse fibrosis at baseline. Liver biopsies at baseline and 12 weeks were blinded by both patient and treatment sequence. They were subsequently read by a central independent liver hepatopathologist using the NASH CRN criteria. Preliminary data from cohorts 2 and 3 showed improvements in fibrosis scores in both groups, with 42% of patients in the 3 mg dosing group of cohort 2 and 25% of the patients in cohort 3 improving by at least one stage, and a mean change of -0.5 and -0.1 fibrosis stage, respectively. All of the patients experiencing improvements in fibrosis scores were F2 or worse at baseline. Between the two cohorts, a total of four patients achieved a two stage improvement in fibrosis during the 12 weeks of treatment (three in the 3 mg dosing group of cohort 2 and one in cohort 3). There were two subjects in the 3 mg dosing group of cohort 2 who worsened by one stage in fibrosis (Stage 1b to 2 and Stage 3 to 4), with no substantive worsening of their NAS and reductions in LFC and ALT. Four patients in cohort 3 worsened by one stage in fibrosis. While each cohort involved a relatively small number of patients, these preliminary results demonstrated, for the first time, the possibility of improving fibrosis in F2 to F4 NASH subjects in as early as 12 weeks of treatment with a therapeutic agent. In addition, the patients with fibrosis improvements also had a mean reduction in NAS of 3.5 and 3.2 in the 3 mg dosing group of cohort 2 and cohort 3, respectively.

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At 12 weeks, NGM282 treatment resulted in resolution of NASH, defined as having a lobular inflammation score of 0 or 1 and a hepatocellular ballooning score of 0, with no worsening of fibrosis in two patients in the 3 mg dosing arm of cohort 2 and three patients in cohort 3. Furthermore, 58% and 50% of patients achieved NAS improvements of two points or greater (with at least one-point reduction in lobular inflammation or hepatocellular ballooning) in the 3 mg dosing arm of cohort 2 and cohort 3, respectively. We anticipate that an increased proportion of patients could achieve resolution of NASH over a longer treatment duration beyond 12 weeks. In conjunction with the fibrosis improvement described above, these data support the notion that NGM282, as a single agent, has the potential to improve NASH and fibrosis to a larger degree and in a shorter period of time than other investigative agents have demonstrated to date.

NGM282 Increases in Serum Levels of LDL Cholesterol in NASH Patients

A byproduct of NGM282’s potent inhibition of the classical bile acid synthesis pathway is the elevation of LDL cholesterol in the serum. Cholesterol serves as the precursor molecule in a multi-step enzymatic pathway that generates various forms of bile acids. CYP7A1 is the rate-limiting enzyme in this pathway and, therefore, serves as a regulatory control point for the primary pathway for bile acid synthesis, also known as the classical pathway. Notably, there is an alternative pathway for bile acid synthesis that is not regulated by CYP7A1 activity and produces a subset of the bile acid pool that is believed to produce less caustic varieties of bile. We believe a primary role of FGF19 and NGM282 is to inhibit bile acid synthesis through the classical pathway by activating a signaling cascade that shuts down CYP7A1 activity. As a direct effect of this on-target activity, cellular cholesterol is no longer metabolized to bile acids and is instead shunted into the blood stream, causing an elevation of serum LDL cholesterol. We have not observed the same magnitude of LDL cholesterol elevations with NGM282 in trials we have conducted in cholestatic disease patients, such as PBC and PSC.

We believe elevated serum LDL cholesterol is a confirmatory indication of NGM282 and FGF19 activity in NASH patients, which correlates with its beneficial effects on liver health. The impact of these drug-induced changes in cholesterol are unknown. Sustained LDL cholesterol elevations in untreated patients, however, are associated with cardiovascular disease through atherosclerotic plaque development. Through both preclinical studies in cynomologous monkeys and in cohorts 2 and 3 of our Phase 2 clinical trial, we have demonstrated the ability of concomitant statin use to mitigate the

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serum LDL cholesterol elevations driven by NGM282 activity. The figure below illustrates the mean LDL cholesterol levels over time for patients in cohort 2. Per protocol, the patients’ LDL cholesterol levels were measured at baseline and then re-measured after two weeks of NGM282 treatment. If an elevation of LDL cholesterol of at least 10 mg/dl was recorded, patients were directed to take 20 mg of rosuvastatin daily for the remainder of the trial. Nearly all of the treated patients required statin use in cohorts 2 and 3. Where required, patients were elevated to 40 mg rosuvastatin to adequately control their LDL cholesterol while on treatment. Notably, approximately 80% of cohort 2 and 87% of cohort 3 at enrollment were not previously receiving statin treatment and, on average, the cohorts had baseline LDL cholesterol levels at or above recommended levels recommended by the American Association of Clinical Endocrinologists and the European Society of Cardiology/European Atherosclerotic Society, suggesting a statin would already be prescribed as standard of care. For each dose level in cohorts 2 and 3, concomitant statin use mitigated the drug-induced LDL cholesterol rise indicative of CYP7A1 suppression and, in many cases, brought patients below their baseline levels. Additionally, we have investigated the composition of the drug-induced LDL cholesterol particles. This analysis indicated that the NGM282-induced serum LDL cholesterol manifests as large and potentially less atherogenic lipoproteins, as opposed to the small dense lipoparticles that are thought to be more atherogenic. We believe concomitant statin use, along with NGM282’s triglyceride lowering and high density lipoprotein, or HDL, cholesterol elevating properties, will provide an overall neutral to positive impact on patients’ cardiovascular health.

NGM282 Phase 2 Clinical Trial in NASH: Safety and Tolerability Profile

The most common adverse events in cohorts 1, 2 and 3 included increased stool frequency, loose stools, nausea and injection site erythema, with the majority being Grade 1 (mild). A single serious adverse event of acute pancreatitis was reported in cohort 1 and assessed as possibly related to study drug. A total of seven serious adverse events (pleurisy, vertigo, headache, hypertension, cardiac arrest, chest pain and pneumonia), none of which were considered related to study drug, were reported in five subjects in cohort 2. One serious adverse event (kidney mass) was reported in cohort 3 and was not considered related to study drug. Preliminary data indicates that there were no tolerability signals identified in this population. The tolerability in cohorts 1, 2 and 3 was consistent with that observed in other study populations, including type 2 diabetes, PBC and PSC.

NGM282 Future Clinical Development Plans

In addition to our ongoing cohort 4, we are planning to begin, in mid-2019, a Phase 2b clinical trial that will test three dose levels of NGM282 in NASH patients with F2 and F3 fibrosis. The Phase 2b

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clinical trial will be a multi-center, double-blind, placebo-controlled study administering 0.3 mg, 1 mg or 3 mg of NGM282 or placebo, once daily, subcutaneously for 24 weeks. We expect approximately 150 patients will be enrolled across 30 sites in the United States. Patients will receive liver biopsies to qualify for the trial and at end of treatment. The primary objective of this 24-week trial will be to measure the treatment effect of NGM282 dosing on liver histology according to preliminary FDA recommended Phase 3 endpoints of resolution of NASH with no worsening of fibrosis, and fibrosis improvement with no worsening of NASH, as defined above. Enrollment criteria, study design and study conduct will be consistent with the FDA draft industry guidance regarding the development of drugs for NASH that was distributed in December 2018.

Our development strategy is to generate interim results of our 24-week double-blind, placebo-controlled cohort 4 trial in 2019 and leverage these results to inform Phase 3 planning and design. We expect that Phase 2b clinical trial results in 2020 will provide further information to compile a detailed package for the regulatory agencies to support a pivotal, single dose level, Phase 3 program to enable a BLA filing.

We are also planning to initiate a clinical program testing NGM282 in a population of NASH patients with compensated cirrhosis in 2019. The objective of this trial is to evaluate whether the fibrosis regression and NAS improvements we have observed in patients with F2 and F3 fibrosis can also be achieved in early, or compensated, cirrhotic NASH patients, for which liver mortality rates are high and liver transplant is the only option. In 2030, the population of compensated cirrhotic NASH patients in the United States and EU is expected to reach 4.9 million.

We believe the totality of the data produced by these Phase 2 clinical trials will provide insights required to appropriately design Phase 3 clinical trials required for drug approval and optimally position the therapeutic in the market.

Future Commercial Positioning of NGM282 as a Therapeutic in the NASH Market

We believe the clinical data produced with NGM282 in NASH patients to date suggests a potential drug profile that is unique in the current landscape of NASH therapeutics in development. Our preliminary data suggests NGM282 is capable of improving fibrosis in patients after only 12 weeks of treatment, while also exerting a positive impact on the other parameters of NASH, including steatosis, lobular inflammation and hepatocellular ballooning. We believe that NGM282’s initial signals of activity observed after 12 weeks of treatment with NGM282, while significant in effect, will lead to further improvement after 24 weeks of treatment. In particular, we believe NAS and fibrosis improvement are enabled by the liver’s natural regenerative properties once the multiple insults of toxic fatty and bile acids are diminished. Our clinical results have shown that markers of liver steatosis and inflammation are reduced in a broad set of patients in the first few weeks of treatment. After only 12 weeks, this environment has allowed the liver to begin healing, but patient healing rates may vary and we believe the process has not reached its full potential. These properties are in contrast to other agents in development that, after 24 weeks or longer treatment, have either only shown impact on NAS components or a modest effect on fibrosis, and may have tolerability or safety issues.

If our initial signals of activity continue in later-stage clinical development, we believe that NGM282, as a once-daily injectable medication, will be well suited to treat NASH patients with F2, F3 and, potentially, early F4 fibrosis. Together, these target patient populations were believed to encompass approximately 6.7 million patients in the United States alone in 2015, and are expected to grow to 14.1 million by 2030. As diagrammed below, our goal is to position NGM282, if approved, to physicians as a potent, rapidly-acting medication that can repair NASH-damaged livers to avoid progression to end-stage liver disease and liver transplantation. This advanced disease population is typically under the care of hepatologists, as contrasted with the typically asymptomatic early-stage

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NASH population, the majority of whom have not yet been diagnosed. We expect other agents in development, many of which are delivered orally, will serve a complementary role in the treatment of earlier-stage disease or may ultimately require combination treatment with other mechanisms to have an improved effect over its single-agent activity.

Commercial Product Development and Life-cycle Management

The drug product format of NGM282 for our clinical trials to date has been a pre-filled single-use glass syringe. Our manufacturing group is developing a formulation of the agent to enable testing a more commercially-attractive format in the form of a multi-use pen injector, similar to the devices currently delivering injectable type 2 diabetes treatments. We expect that the multi-dose pen format could be available for product launch, if the agent is approved. Our objective is to present a multi-dose pen with needle gauge 29 or smaller, which will be familiar to the large number of NASH patients with type 2 diabetes who also require injections of insulin or GLP-1 products.

Longer term, we are pursuing a life-cycle management strategy to develop a longer half-life version of NGM282 that will require less frequent dosing. At present, we have programs investigating delayed-release technologies and protein modification to support this strategy. These efforts are currently at the research stage.

Early NGM282 Clinical Development and Preclinical Development

Our development program for NGM282 in NASH has been informed by several precursor and parallel clinical studies, as well as preclinical findings in a variety of NASH animal models. In all clinical trials, NGM282 had an acceptable tolerability profile. A summary of the studies conducted with NGM282 are listed below:

NGM282 Phase 1 Clinical Trial

We conducted a Phase 1 randomized, double-blind, placebo-controlled, single ascending dose, or SAD, and multiple ascending dose, or MAD, study to evaluate the safety, tolerability and pharmacokinetics of NGM282 in healthy adult participants.

Our Phase 1 clinical trial with NGM282, which is emblematic of our overall drug discovery approach in that we design early clinical trials to assess the translatability of preclinical studies to

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humans, demonstrated a favorable tolerability profile, with signs of biological activity consistent with FGF19-like activity related to FGFR1c and FGFR4 signaling, suggesting potential utility as a treatment for NASH.

In this blinded, placebo-controlled, Phase 1 clinical trial, 119 overweight or obese but otherwise healthy adults were randomized to receive NGM282 or placebo as a daily subcutaneous injection in escalating doses. A rapid and dose-proportional reduction of serum C4 concentrations indicated that NGM282 has a statistically significant effect on bile acid synthesis at the 0.3 mg, 1 mg and 3 mg doses. A mean reduction of approximately 94% in serum C4 concentrations was noted at 3 mg when compared with pre-dose levels. This rapid reduction in C4 levels supports the potential biological activity of NGM282 as an inhibitor of CYP7A1-mediated bile acid synthesis.

Laboratory analysis of blood samples collected from subjects receiving NGM282 in the Phase 1 MAD trial showed that administration of the drug for seven days was associated with statistically significant reductions in triglyceride levels at doses of 1 mg and greater (-55, -50, -68 and -89 mg/d, respectively, for the 1, 3, 10 and 20 mg dose groups: p<0.05), and a statistically significant increase in total cholesterol concentrations (12, 40, 22 and 24 mg/d, respectively, for the 1, 3, 10 and 20 mg dose groups: p<0.05).

In both the SAD and MAD trials, NGM282 was well tolerated and exhibited approximately linear pharmacokinetics with no immunogenicity. There were no serious adverse events. The most frequently observed adverse events were diarrhea, vomiting, nausea and injection site reactions. Also, there were no laboratory changes in NGM282-treated subjects that would indicate an abnormality in any organ system, as determined by the Safety Data Monitoring Committee for the study, nor were anti-drug antibodies, or ADAs, observed.

NGM282 Phase 2a Clinical Trial (Type 2 Diabetes)

We conducted a 28-day, randomized, double-blind, multi-center trial to evaluate NGM282 in subjects with type 2 diabetes that were inadequately controlled by metformin. As a consequence of the contribution of obesity and insulin resistance to both conditions, there is a substantial overlap in the prevalence of type 2 diabetes and NASH patients. The type 2 diabetes trial was also designed to measure several of the metabolic parameters that are believed to play a role in the disease progression of NAFLD and NASH, including indicators of insulin sensitivity, triglyceride levels and liver transaminases, such as ALT and AST, enzyme levels. Three doses of NGM282 were tested to assess changes from baseline in biochemical markers associated with type 2 diabetes, such as fasting plasma glucose and stimulated glucose/insulin.

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The primary endpoint measured by this trial was the change in fasting plasma glucose after 28 days of treatment. Although this endpoint was not different in the NGM282 subjects as compared to the control arm, there were trends towards improvement in insulin sensitivity, as measured by HOMA-IR, and a statistically significant weight loss observed in the 10 mg group, which lost an average of 2.6 kilograms over the 28 days of treatment (p<0.05). Moreover, there was a statistically significant reduction in triglyceride concentrations with the 2 mg (p<0.001) and 10 mg (p<0.001) doses, and dose-dependent reductions in ALT and AST levels, consistent with improvements in liver health. However, as this trial did not meet its primary endpoint, we decided not to pursue development of NGM282 in type 2 diabetes. The trial did establish that NGM282 demonstrated improvements in both metabolic and liver health in a patient population that closely resembles NASH patients.

Overall, NGM282 was well-tolerated at each dose. There were no serious adverse events reported, though nine subjects withdrew due to adverse events. The most frequently observed adverse events were GI side effects, which were primarily loose stools/diarrhea, nausea and injection site reactions. One subject developed antibodies against NGM282 that appear to cross-react with FGF19. This subject did not demonstrate any biochemical or clinical safety concerns while in the study, and we have not identified any safety concerns while monitoring the subject following the study.

NGM282 Phase 2 Clinical Trials in Cholestatic Diseases: PBC and PSC

We conducted an exploratory Phase 2a clinical trial in PBC patients testing daily subcutaneous injections of NGM282 for 28 days, and followed it with a 52-week extension study to assess longer-term safety and tolerability of daily NGM282. While both doses tested in the 28-day study met the primary endpoint of a statistically significant reduction in ALP levels (a validated surrogate endpoint by the FDA), we determined that, with two oral alternatives on the market with similar efficacy, the indication was not well-suited for NGM282.

NGM282 was well tolerated at each dose and showed no evidence of drug-induced pruritus. The majority of adverse events were mild or moderate. In the 28-day study, one subject reported a serious adverse event (dizziness) deemed unrelated to drug. In the 52-week extension study, three subjects reported a total of five serious adverse events: community acquired pneumonia, iron deficiency anemia (2) and fractured finger, all deemed unrelated to study drug; and pneumonitis/alveolitis, which was considered unlikely related to study drug. A statistically significant elevation of LDL cholesterol concentration was not observed in this patient population.

We also conducted an exploratory Phase 2 clinical trial in PSC patients with NGM282. Unlike PBC, there are currently no approved medications for PSC and, similarly, there are no validated clinical

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endpoints accepted by the FDA for approval. NGM282 did not achieve the primary endpoint in the study, which was a statistically significant reduction in ALP levels at the end of treatment. While ALP concentration has also been viewed as a possible surrogate endpoint in PSC, the correlation with disease progression is not as clear as in PBC, and the FDA is developing guidance to drug developers as to an acceptable path to approval. We do not intend to further develop NGM282 in PSC until a development path is more specifically defined in the indication. However, the results of the study also provide utility in understanding the mechanism of NGM282 across the diseases tested. Notably, PRO-C3 and ELF levels, which are markers of fibrosis, improved significantly in the treatment group, suggesting that NGM282 may also have a direct impact on fibrosis that is independent from its metabolic activity, as the PSC patient population does not have elevated liver fat content. Furthermore, a statistically significant elevation of LDL cholesterol concentration was not observed in this patient population.

The majority of adverse events were mild or moderate and resolved on treatment. Five total serious adverse events were reported in three subjects: increased bilirubin, cholangitis, PSC progression and intervertebral discitis, deemed unrelated to study drug; and bowel obstruction, deemed possibly related to NGM282 treatment.

NGM282 Phase 1 Clinical Trial in GI Motility

A consistent finding in our Phase 2 clinical trials has been an association of NGM282 to dose-related abdominal cramping and increased stool frequency. To further investigate and characterize these gastrointestinal effects, we conducted a randomized, placebo-controlled, 14-day study in patients with functional constipation that tested two doses of NGM282, 1 mg once daily and 6 mg once daily. The objective of the study was to evaluate the effects of NGM282 on colonic transit, stool frequency and consistency, hepatic bile acid synthesis, fecal fat and bile acid levels. Thirty-one patients with functional constipation were randomized on a 1:1:1 basis to placebo (n=10), 1 mg NGM282 (n=10) and 6 mg NGM282 (n=11) arm. Participants underwent tests measuring baseline colonic transit at 24 hours, baseline 48-hour stool fat and bile acid measurement after eating a high fat diet for four days. Patients then received once-daily treatment with NGM282 or placebo for 14 days with transit measurements and fecal fat and bile acid content collected during the last week of the study. Four patients discontinued the trial in the 6 mg cohort (three due to diarrhea and one due to injection site reactions) and no patients discontinued treatment in the placebo or 1 mg NGM282 cohorts. Overall, NGM282 altered bowel function in this group of chronic constipation subjects through increased frequency of bowel movements, looser stool form and increased ease of passage, and significantly accelerated gastric and colonic transit. There were no significant differences in fecal fat or weight between the placebo and treatment groups, suggesting that GI effects of NGM282 are not secondary to an increase in fecal fat. We believe the results of this study show that GI side effects are primarily due to increased colonic motility, rather than increased small bowel or colonic secretion, the latter of which is more characteristic of diarrhea than loose stools. We have applied this mechanistic understanding to our clinical trial by suggesting that subjects time their dosing around meals and moderate the size of a meal in proximity to dose. While the GI side effects of NGM282 are consistent through the clinical studies conducted to date, we have observed that those patients on 3 mg and lower doses that do experience GI side effects generally report mild to moderate effects that resolve on treatment and do not lead to discontinuation of the drug.

NGM282 Engineered to Create a Non-tumorigenic Form of FGF19

Human FGF19 is only about 50% identical to its mouse ortholog, known as FGF15. In vivo studies have shown that transgenic mice expressing the human FGF19 hormone at proportionally greater levels than levels expressed in healthy humans develop HCC. NGM282 is a variant of FGF19, engineered to remove the tumorigenic properties of human FGF19 in mice while retaining its beneficial

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effects. Prior to designating NGM282 for development, we carried out an extensive in vivo analysis of the structure-function relationship to define the domains in FGF19 responsible for its various activities. Our goal was to identify a variant of human FGF19 that was non-tumorigenic in mice but that retained maximal activity against both the FGFR1c/KLB and FGFR4/KLB receptor complexes so that full metabolic and bile acid effects would be maintained. We designed and evaluated over 150 FGF19 variants to identify compounds with the desired profile. NGM282 is approximately 95% identical to the naturally-occurring human FGF19, with three amino acid substitutions and a five-amino acid deletion from the amino terminus.

NGM282 retains the metabolic activity of FGF19 through the FGFR1c/KLB receptor complex and the bile acid activity of FGF19 through the FGFR4/KLB receptor complex. Importantly, NGM282 is a biased ligand of FGFR4, meaning that it selectively activates signaling through the FGFR4/KLB receptor complex in a manner that retains beneficial activity on bile acid production but does not cause HCC in mice, as shown in three different models of oncogenic potential. Furthermore, co-administration of NGM282 and FGF19 via gene delivery in a db/db mouse model eliminated the expected FGF19-driven HCC, suggesting that NGM282 blocked the ability of FGF19 to occupy the relevant receptor and signal in such a way as to cause HCC. We have also explored the biological mechanism that drives the FGF19 oncogenic signal in mice and have determined that the interleukin-6, or IL-6/STAT3 axis is essential for the activity. The elements of the IL-6/STAT3 axis that drive the FGF19 oncogenic signal in mice are not activated with NGM282.

NGM282’s Therapeutic Potential Supported by Preclinical Animal Models of NASH

We have assessed the therapeutic potential of NGM282 in multiple animal models of NASH and have observed a consistent pattern of disease prevention and improvement. The animal models in which we have tested NGM282 and the corresponding results are summarized in the table below.

In addition to testing NGM282 in these animal models of NASH, we tested a variant of FGF19 that only activates FGFR4 and does not activate FGFR1c. The purpose of creating this variant was to develop a tool by which we could understand the relative contribution of FGFR4 and FGFR1c signaling to the therapeutic effects of FGF19. In the diet-induced, high fat, high fructose, high cholesterol, or HFFC, mouse model of NASH, study animals were administered viral vectors expressing either: (1) an

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analog of FGF19 that activates both FGFR4 and FGFR1c signaling; (2) an analog of FGF19 that activates only FGFR4 signaling; or (3) a control protein, green fluorescent protein, or GFP. After 24 weeks of treatment, the degree of liver fibrosis was compared across the study groups by means of Sirius red staining, which is a common method of identifying fibrosis. The results demonstrated that the mice that received the analog of FGF19 that activated only FGFR4 showed nearly as much fibrosis improvement compared to the compound that activated both FGFR4 and FGFR1c.

We believe these preclinical results show that inhibiting bile acid synthesis through the FGFR4 pathway enables NGM282 to have a more rapid and direct impact on fibrosis as compared to other agents that only address the metabolic dysfunction of NASH. These data, now further supported by our Phase 2 results in biopsy-confirmed NASH patients, show the spectrum of activity enabled by mimicking the native FGF19 hormone at pharmacological levels has a potent therapeutic benefit on multiple disease drivers of NASH.

NGM313: An Insulin Sensitizer for the Treatment of Type 2 Diabetes and NASH

NGM313, also known as MK-3655, is a proprietary, agonistic antibody selectively activating FGFR1c/KLB that we believe has the potential to be a once-monthly injectable insulin sensitizer for the treatment of NASH and type 2 diabetes. In November 2018, Merck exercised its option for a license to further research, develop and commercialize NGM313 and other FGFR1c/KLB agonists pursuant to our collaboration agreement. In Phase 1 clinical testing, NGM313 has demonstrated favorable tolerability and preliminary 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. We believe that NGM313 has the potential to be a treatment for those patients with NASH with early to moderate fibrosis with or without type 2 diabetes.

Type 2 Diabetes

Type 2 diabetes is a common co-morbidity of obesity and NAFLD, and a disease in which the concentration of blood sugar is elevated due to an imbalance of insulin production from insulin secreting beta cells in the pancreas and insulin action at the tissue level, known as insulin resistance, causing damage to small and large blood vessels and, potentially, leading to blindness, amputation and kidney disease along with an increased risk of heart attack, stroke and premature death. In type 2 diabetes, the body’s tissues become resistant to the effects of insulin over time, requiring the pancreas to produce an unsustainably large amount of insulin to compensate. The growing epidemic of obesity is driving an increasing number of diabetes sufferers, as there is a close relationship between increasing BMI and the relative risk of developing type 2 diabetes.

According to the Centers for Disease Control and Prevention, or CDC, in 2015, an estimated 30 million people in the United States had diabetes, with 1.5 million new cases being added every year. Over 80 million people in the United States are pre-diabetic, the majority of whom are expected to become diabetic in the next ten years. The medical costs of treating the diabetic patient population in the United States alone are believed to be $327 billion in 2017. Given the large patient population and high unmet need, pharmaceutical companies have developed multiple classes of therapies. The most recent classes include GLP-1 analogs, SGLT2 inhibitors and DPP-IV inhibitors, which, according to EvaluatePharma, collectively sold over $21 billion worldwide in 2017 and are expected to sell as much as $33 billion by 2022. According to EvaluatePharma, insulin, for which the recombinant human version was first introduced in 1982, and insulin analogues sold approximately $21 billion in 2017 worldwide.

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The currently available types of treatments include:

The majority of patients with type 2 diabetes are insulin resistant and have associated metabolic dysregulation caused by lipid abnormalities, fatty liver, hypertension and chronic vascular inflammation. Insulin resistance and beta cell dysfunction are interrelated pathogenic states that lead to persistent hyperglycemia and development of type 2 diabetes. Insulin resistance results from defective insulin signaling in glucose recipient tissues and the persistent elevation of glucose concentrations above the physiological range, leading to increased insulin demand. Beta cell dysfunction, resulting from inadequate glucose sensing to stimulate insulin secretion, is compounded by insulin resistance and also induces hyperglycemia in patients with type 2 diabetes. Preserving beta cell function and insulin signaling in type 2 diabetes patients remain an unmet medical need as persistent hyperglycemia leads to continued progression of diabetes. Even with the multiple classes of diabetes drugs available, only about one-half of patients with diabetes achieve their glycemic goal.

Insulin Sensitizers for the Treatment of Type 2 Diabetes

Insulin resistant patients that remain inadequately controlled often have NAFLD, low HDL cholesterol level and increased waist circumference, and are likely the best candidates for treatment with insulin sensitizers. TZDs, such as pioglitazone and rosiglitazone, are a notable class of drugs that function as insulin sensitizers to potentiate the effect of insulin, improving glycemic control and dyslipidemia and, therefore, providing a valuable addition to diabetes therapy. As a monotherapy, pioglitazone improves the sensitivity of hepatic and peripheral tissue to insulin, increases insulin-dependent glucose disposal, enhances cellular responsiveness to insulin and, thus, improves dysfunction in glucose homeostasis. This decreased insulin resistance results in a durable lowering of blood glucose, insulin and hemoglobin A1c, or HbA1c levels. However, the clinical use of TZDs has been limited by the risk of adverse events, including congestive heart failure, for which there is a FDA boxed warning, weight gain, peripheral edema/fluid retention, bone fractures and an association with bladder cancer for pioglitazone.