SEC Filing | NGM Biopharmaceuticals, Inc.

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ngm-10q_20200930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number: 001-38853

NGM BIOPHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	26-1679911
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
333 Oyster Point Boulevard South San Francisco, CA	94080
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (650) 243-5555

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class of Securities Registered	Trading Symbol	Name of Each Exchange on which Securities are Registered
Common Stock, par value $0.001 per share	NGM	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 9, 2020, the registrant had 69,019,269 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019 (Audited)	1
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (Unaudited)	2
	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2020 and 2019 (Unaudited)	3
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2020 (Unaudited)	4
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2019 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION	40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	92
Item 3.	Defaults Upon Senior Securities	92
Item 4.	Mine Safety Disclosures	92
Item 5.	Other Information	92
Item 6.	Exhibits	93
Signatures		94

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

NGM BIOPHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

	September 30,			December 31,
	2020			2019*
Assets
Current assets:
Cash and cash equivalents	$	253,976		$	245,598
Short-term marketable securities		33,973			98,913
Related party receivable from collaboration		7,215			5,206
Prepaid expenses and other current assets		7,076			5,531
Total current assets		302,240			355,248
Property and equipment, net		15,773			19,475
Restricted cash		1,499			1,874
Other non-current assets		6,570			3,806
Total assets	$	326,082		$	380,403
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,613		$	9,026
Accrued liabilities		28,579			22,991
Deferred rent, current		2,938			2,829
Deferred revenue, current		4,586			4,872
Total current liabilities		37,716			39,718
Deferred rent, non-current		7,179			9,392
Other non-current liabilities		4,315			—
Early exercise stock option liability		169			574
Total liabilities		49,379			49,684
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding as of September 30, 2020 and December 31, 2019, respectively		—			—
Common stock, $0.001 par value; 400,000,000 shares authorized; 68,934,767 and 66,960,279 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		69			67
Additional paid-in capital		547,259			526,771
Accumulated other comprehensive gain		15			25
Accumulated deficit		(270,640	)		(196,144	)
Total stockholders' equity		276,703			330,719
Total liabilities and stockholders' equity	$	326,082		$	380,403

See accompanying notes to unaudited condensed consolidated financial statements.

*The condensed consolidated balance sheet as of December 31, 2019 has been derived from the audited financial statements as of that date.

NGM BIOPHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Related party revenue	$	23,482		$	21,568		$	67,601		$	72,461
Operating expenses:
Research and development		46,979			28,953			123,912			87,299
General and administrative		6,460			5,612			19,849			17,208
Total operating expenses		53,439			34,565			143,761			104,507
Loss from operations		(29,957	)		(12,997	)		(76,160	)		(32,046	)
Interest income		260			1,984			1,823			5,138
Other income (expense), net		(68	)		96			(159	)		54
Net loss	$	(29,765	)	$	(10,917	)	$	(74,496	)	$	(26,854	)
Net loss per share, basic and diluted	$	(0.43	)	$	(0.17	)	$	(1.09	)	$	(0.60	)
Weighted average shares used to compute net loss per share, basic and diluted		68,815,696			65,948,207			68,174,654			44,828,596

See accompanying notes to unaudited condensed consolidated financial statements.

NGM BIOPHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Net loss	$	(29,765	)	$	(10,917	)	$	(74,496	)	$	(26,854	)
Other comprehensive gain (loss), net of tax:
Net unrealized gain (loss) on available-for-sale marketable securities		(122	)		(3	)		(10	)		366
Total comprehensive loss	$	(29,887	)	$	(10,920	)	$	(74,506	)	$	(26,488	)

See accompanying notes to unaudited condensed consolidated financial statements.

NGM BIOPHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Common Stock				Additional Paid-In		Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Capital		Gain (Loss)			Deficit			Equity
Balance at December 31, 2019		66,886	$	67	$	526,771	$	25		$	(196,144	)	$	330,719
Issuance of common stock upon exercise of stock options		984		1		3,590		—			—			3,591
Vesting of common stock from early exercises		21		—		162		—			—			162
Stock-based compensation expense		—		—		3,695		—			—			3,695
Changes in unrealized loss on available-for-sale securities		—		—		—		(80	)		—			(80	)
Net loss		—		—		—		—			(19,115	)		(19,115	)
Balance at March 31, 2020		67,891	$	68	$	534,218	$	(55	)	$	(215,259	)	$	318,972
Issuance of common stock upon exercise of stock options		680		1		2,365		—			—			2,366
Issuance of common stock in connection with employee stock purchase plan		109		—		1,285		—			—			1,285
Issuance of common stock under 401(k) Plan		6		—		119		—			—			119
Vesting of common stock from early exercises		16		—		123		—			—			123
Stock-based compensation expense		—		—		3,723		—			—			3,723
Changes in unrealized gain on available-for-sale securities		—		—		—		192			—			192
Net loss		—		—		—		—			(25,616	)		(25,616	)
Balance at June 30, 2020		68,702	$	69	$	541,833	$	137		$	(240,875	)	$	301,164
Issuance of common stock upon exercise of stock options		195		—		1,257		—			—			1,257
Vesting of common stock from early exercises		17		—		120		—			—			120
Stock-based compensation expense		—		—		4,049		—			—			4,049
Changes in unrealized loss on available-for-sale securities		—		—		—		(122	)		—			(122	)
Net loss		—		—		—		—			(29,765	)		(29,765	)
Balance at September 30, 2020		68,914	$	69	$	547,259	$	15		$	(270,640	)	$	276,703

See accompanying notes to unaudited condensed consolidated financial statements.

NGM BIOPHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK

AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In Thousands)

	Convertible Preferred Stock						Common Stock⁽¹⁾				Additional Paid-In		Other Comprehensive			Accumulated			Total Stockholders'
	Shares			Amount			Shares		Amount		Capital		Gain (Loss)			Deficit			Equity(Deficit)
Balance at December 31, 2018		47,267		$	294,874			6,733	$	7	$	39,258	$	(267	)	$	(147,193	)	$	(108,195	)
Issuance of common stock upon exercise of stock options		—			—			80		—		279		—			—			279
Issuance of common stock under 401(k) Plan		—			—			8		—		98		—			—			98
Vesting of common stock from early exercises		—			—			34		—		237		—			—			237
Stock-based compensation expense		—			—			—		—		2,605		—			—			2,605
Changes in unrealized gain on available-for-sale securities		—			—			—		—		—		222			—			222
Net exercise of preferred stock warrant to Series A preferred stock		16			198			—		—		—		—			—			-
Cumulative effect adjustment upon adoption of ASU 2014-09		—			—			—		—		—		—			(6,156	)		(6,156	)
Net loss		—			—			—		—		—		—			(8,268	)		(8,268	)
Balance at March 31, 2019		47,283		$	295,072			6,855	$	7	$	42,477	$	(45	)	$	(161,617	)	$	(119,178	)
Conversion of Series A, B, C, D, E convertible preferred stock to common stock concurrent with initial public offering		(47,283	)		(295,072	)		47,283		47		295,025		—			—			295,072
Issuance of common stock upon initial public offering, net of issuance cost		—			—			7,521		8		107,748		—			—			107,756
Issuance of common stock upon private placement		—			—			4,122		4		65,943		—			—			65,947
Issuance of common stock upon exercise of stock options		—			—			86		—		258		—			—			258
Vesting of common stock from early exercises		—			—			32		—		245		—			—			245
Stock-based compensation expense		—			—			—		—		3,552		—			—			3,552
Changes in unrealized gain on available-for-sale securities		—			—			—		—		—		147			—			147
Net loss		—			—			—		—		—		—			(7,669	)		(7,669	)
Balance at June 30, 2019		—			—			65,899	$	66	$	515,248	$	102		$	(169,286	)	$	346,130
Issuance of common stock upon exercise of stock options		—			—			116		—		643		—			—			643
Vesting of common stock from early exercises		—			—			32		—		244		—			—			244
Stock-based compensation		—			—			—		—		3,089		—			—			3,089
Changes in unrealized loss on available-for-sale securities		—			—			—		—		—		(3	)		—			(3	)
Net loss		—			—			—		—		—		—			(10,917	)		(10,917	)
Balance at September 30, 2019		—			—			66,047	$	66	$	519,224	$	99		$	(180,203	)	$	339,186

(1)

In April 2019, the Company completed its initial public offering (“IPO”) and concurrent private placement with Merck Sharp & Dohme Corp. (“Merck”), in which the Company issued an aggregate of 7,521,394 and 4,121,683 shares of common stock, respectively, for net proceeds of $107.8 million and $65.9 million, respectively. Upon the closing of the IPO, all of the then outstanding shares of convertible preferred stock were automatically converted into shares of common stock and its related carrying amount of $295.1 million was reclassified to common stock and additional paid-in-capital.

See accompanying notes to unaudited condensed consolidated financial statements.

NGM BIOPHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)

	Nine Months Ended
	September 30,
	2020			2019
Cash flows from operating activities
Net loss	$	(74,496	)	$	(26,854	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		5,002			5,838
Amortization of discount on marketable securities		(208	)		(1,024	)
Stock-based compensation expense		11,467			9,246
Other non-cash expenses		236			212
Changes in operating assets and liabilities:
Related party receivable from collaboration		(2,009	)		3,669
Prepaid expenses and other assets		(3,715	)		(4,334	)
Accounts payable		(7,108	)		(1,318	)
Accrued expenses and other liabilities		9,765			4,485
Deferred rent		(2,104	)		(1,994	)
Deferred revenue		(286	)		(14,499	)
Net cash used in operating activities		(63,456	)		(26,573	)
Cash flows from investing activities
Purchase of marketable securities		(29,399	)		(75,224	)
Proceeds from sales and maturities of marketable securities		94,537			172,767
Purchase of property and equipment		(1,605	)		(2,430	)
Net cash provided by investing activities		63,533			95,113
Cash flows from financing activities
Proceeds from issuance of common stock upon initial public offering, net of issuance costs		—			110,078
Proceeds from issuance of common stock upon completion of private placement		—			65,947
Proceeds from issuance of common stock upon exercise of stock options		7,214			1,153
Proceeds from issuance of common stock in connection with employee stock purchase plan		1,285			—
Payments of deferred financing costs		(573	)		—
Net cash provided by financing activities		7,926			177,178
Net increase in cash and cash equivalents		8,003			245,718
Cash, cash equivalents and restricted cash at beginning of period		247,472			59,172
Cash, cash equivalents and restricted cash at end of period	$	255,475		$	304,890

Non-cash investing and financing activities:
Net exercise of convertible preferred stock warrant to Series A preferred stock	$	—		$	198
Vesting of common stock from early exercises		405			726
Deferred offering costs accrued but not yet paid		21			-

See accompanying notes to unaudited condensed consolidated financial statements.

NGM BIOPHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDSENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business

NGM Biopharmaceuticals, Inc. and its wholly-owned subsidiary (collectively, referred to as the “Company”) is a biopharmaceutical company focused on discovering and developing novel therapeutics based on scientific understanding of key biological pathways underlying liver and metabolic diseases, retinal diseases and cancer. The six most advanced proprietary product candidates in the Company’s portfolio are aldafermin (NGM282), NGM313, NGM621, NGM120, NGM395 and NGM707.

The Company was incorporated in Delaware in December 2007 and commenced operations in 2008. Its headquarters are located at 333 Oyster Point Blvd., South San Francisco, California 94080.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and Regulation S-X for interim consolidated financial information. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the United States Securities and Exchange Commission (“SEC”) on March 17, 2020 (the “Annual Report”). These unaudited condensed consolidated financial statements reflect all adjustments that management believes are necessary for a fair presentation of the periods presented. All such adjustments are of a normal recurring nature and are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.

These unaudited condensed consolidated financial statements include the consolidated accounts of NGM Biopharmaceuticals, Inc. and its wholly-owned foreign subsidiary in Australia. All intercompany balances and transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Specific accounts that require management estimates include, but are not limited to, the valuation of common stock and the associated stock-based compensation expense, contract manufacturing accruals, clinical trial accruals and revenue recognition in accordance with Accounting Standards Codification 606 (“ASC 606”). Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates.

Need for Additional Capital

Since inception, the Company has incurred net losses and negative cash flow from operations. During the three and nine months ended September 30, 2020, the Company incurred net losses of $29.8 million and $74.5 million, respectively, compared to $10.9 million and $26.9 million, respectively, for the three and nine months ended September 30, 2019. As of September 30, 2020, the Company had an accumulated deficit of $270.6 million and does not expect to experience positive cash flows from operations in the near future. The Company had $287.9 million of cash, cash equivalents and marketable securities as of September 30, 2020, which it considers sufficient to fund its operations for a period of at least one year from the date these unaudited condensed consolidated financial statements are available for issuance. The Company plans to continue to fund its operations and pursue its strategy through public or private equity or debt financings, government or other third-party funding, collaborations, strategic alliances, licensing arrangements or a combination of these.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, receivables from collaborations, the related party receivables from collaboration and other current assets and liabilities approximate their respective fair values because of the short-term nature of those instruments.

Cash and Cash Equivalents

Cash and cash equivalents are stated at fair value. Cash equivalents are securities with an original maturity of three months or less at the time of purchase. The Company limits its credit risk associated with cash and cash equivalents by placing its investments with a bank it believes is highly creditworthy and with highly rated money market funds. As of September 30, 2020 and December 31, 2019, cash and cash equivalents consisted of bank deposits and investments in money market funds.

Marketable Securities

The appropriate classification of the Company’s marketable securities is determined at the time of purchase and such designations are re-evaluated at each balance sheet date. All of the Company’s securities are considered available-for-sale, carried at estimated fair values and reported in cash equivalents, short-term marketable securities or long-term marketable securities. Unrealized gains and losses on available-for-sale securities are excluded from net loss and reported in accumulated other comprehensive loss as a separate component of stockholders’ equity. Other income (expense), net, includes interest, amortization of purchase premiums and accretion of purchase discounts, realized gains and losses on sales of securities and other-than-temporary declines in the fair value of securities, if any. The cost of securities sold is based on the specific identification method.

The Company’s investments are regularly reviewed for other-than-temporary declines in fair value. This review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, whether the Company has the intent to sell the securities and whether it is more likely than not that the Company will be required to sell the securities before the recovery of their amortized cost basis. When the Company determines that the fair value of an investment is below its carrying value and this decline is other-than-temporary, the Company reduces the carrying value of the security it holds and records a loss for the amount of such decline. As of September 30, 2020, the Company did not record any impairment related to other-than-temporary declines in the fair value of securities.

Restricted Cash

The Company’s restricted cash represents collateral in connection with the lease on the Company’s headquarters entered into in 2015 and is classified as a non-current asset on the condensed consolidated balance sheets as the collateral will not be returned to the Company in less than 12 months (Note 6).

Concentration of Credit and Other Risks

Cash and cash equivalents and marketable securities from the Company’s available-for-sale and marketable security portfolio potentially subject the Company to concentrations of credit risk. The Company is invested in money market funds and marketable securities through custodial relationships with major U.S. and Australian banks. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government.

Related party receivables from collaboration agreements (Note 5) are typically unsecured. Accordingly, the Company may be exposed to credit risk generally associated with its Research Collaboration, Product Development and License Agreement with Merck (“Collaboration Agreement”). To date, the Company has not experienced any losses related to these receivables.

Merck accounted for 100% of the Company’s revenue for the three and nine months ended September 30, 2020 and 2019.