NGM Biopharma (NASDAQ: NGM) has been on my radar since the IPO after strong insider buying and novel approach towards non-alcoholic steatohepatitis, NASH. Another $1.3 million of the common stock was bought by insiders in the past week. The next data readout is Phase 2 data from cohort 4 for NGM282 in treating NASH (24 weeks follow-up) is expected in Q4 this year.
Data so far:
NASH is expected to become the number one cause of liver transplant in the U.S. by 2020. Approximately, 25% of the global population is expected to have non-alcoholic fatty liver disease, NAFLD, of which approximately 25% progress to NASH. The U.S. prevalence of NAFLD is 34% and 12% of the population has NASH. Global NASH market is expected to reach $13.4 billion by 2026, growing at 53% CAGR.
NGM Bio is developing, NGM282, an engineered variant of the human hormone fibroblast growth factor 19 (FGF19), as a once-daily injection for the treatment of NASH. FGF19 is a highly specific and potent regulator of liver fat metabolism and bile acid synthesis that is responsible for some of the beneficial effects of gastric bypass surgery on NASH. Its action of reducing insulin resistance and toxic fatty acid is expected to have a beneficial effect on reducing liver fat steatosis and inflammation. Its action of reducing bile acid synthesis is expected to have a beneficial effect on liver cells ballooning and fibrosis. NGM282 is thus expected to have a wide target NASH population due to dual metabolic and antifibrotic effects, ranging from liver fibrosis stages F1 to F4. An autoinjector s/q form of the drug is expected to increase patient convenience.
Preliminary results from Phase 2 clinical trials have provided clinical proof of concept of NGM282 by demonstrating statistically significant reductions in liver fat, liver transaminases and biomarkers of fibrosis, which has translated to improvements in liver histology and fibrosis at 12 weeks. In the phase 2, open-label data presented so far (cohort 2), NGM282 showed 67% reduction in liver fat content (measured by MRI, higher than that shown by currently experimental agents), 60% reduction in inflammation (as measured by serum ALT), a 33% reduction in liver fibrosis (measured by PRO-C3 levels), and a 93% reduction in bile acids (as measured by C4 levels) compared to the baseline at 12 weeks. All subjects also achieved the primary phase 2 endpoint of 5 percent or more reduction in liver fat content. The effect on liver fibrosis was impressive and 42% subjects treated with higher 3 mg dose achieved fibrosis improvement of one stage or more (one of FDA’s NASH trials primary endpoints). 84% subjects in the 3 mg dose had a significant improvement in the NAS score (that measures liver steatosis, ballooning and inflammation).
(NGM282 has shown higher relative change in liver fat from the baseline than competition, source Citi Research)
In addition, the drug has been safe and tolerable in over 400 subjects treated so far. Mild elevation in serum LDL cholesterol (which is an effect of bile acid synthesis inhibition) was manageable by adding low dose statins. However, this effect of NGM282 is very potent in improving liver fibrosis, the holy grail in NASH therapies.
The cohort 4 of phase 2 trial of NGM282 is enrolling NASH patients with F2-3 fibrosis. The trial is placebo controlled, dose of 1 mg/day and duration= 24 weeks (longer than previous results). A phase 2b ALPINE trial for NGM282 in NASH with F2/3 fibrosis is expected to start enrollment soon, followed by data in 2020. ALPINE 4, phase 2b trial for NGM282 in NASH-F4 stage is expected to start enrollment later this year. The company expects the target NASH population for NGM282 as 6.1M patients and grow to 14M by 2030 (including 4.9M patients with NASH and compensated cirrhosis).
The second lead candidate NGM313 is an FGFR1c/KLB agonist and is licensed by Merk (MRK). It acts as an insulin sensitizer and is given once monthly. In a phase 1b study, it significantly reduced liver fat and metabolic abnormalities in obese, insulin-resistant, NAFLD patients after just 5 weeks after a single dose. In addition, it also showed beneficial effects on glycemic control by reducing HB1C. NGM313 is likely to have application in earlier stages of NASH and has the potential to be combined with NGM282 to treat the entire spectrum of NASH (ranging from steatosis to fibrosis across stages F1-4). The next steps in NGM313 program is a phase 2b study in NASH F2/3 with/without type 2 diabetes which is planned to start in 2020. NGM has an option to participate in 50% of the economic return of the program (once in phase 3) or opt for milestone/sales payments and tiered royalties on net sales.
Beyond NGM313, NGM also has Merck partnership for other assets in the pipeline, for example, an option by Merck to license NGM120 (GFRAL antagonist antibody in treating cancer anorexia/cachexia syndrome, in phase 1), NGM217 (undisclosed mechanism, long-acting) in diabetes (in phase 1), and NGM621 (undisclosed mechanism, long acting) in dry age-related macular degeneration (preclinical stage).
(NGM Bio: R&D Pipeline)
Next key data releases:
- Phase 2, cohort 4 data for NGM282 in NASH, F2-3 stage in Q4, 2019.
- Phase 2b, ALPINE 2/ 3 trial data for NGM282 in NASH, F2-3 stage in 2020.
The company is well-funded and reported $321.7M in cash reserves at the end of Q1 this year (after IPO proceeds and private placements with Merck) and no long-term debt. Net operating cash use was $12M in Q1, so the company may not need additional funding through 2020. The company’s market cap is $906M (with $321.7M in cash). NGM282 is a key asset for the company with mechanisms and potential target market in NASH similar to that projected for Intercept Pharmaceuticals (ICPT) OCA (consensus peak sales estimate of $700M in 2021). The cumulative peak revenue in NASH including NGM282 and NGM313 could exceed $1 billion. Even in a base case, my fair value estimate for the equity is $1.45 billion, representing >50% upside from the current stock price. The stock reached a post IPO high of $19/share and has now pulled back and on an uptrend now.
Key selling points:
- Insider buying after IPO including by Merck (approx. $75M of common stock was bought by various insiders after the IPO including Merck). Insiders buying the stock include David Goeddel, world-renowned genetic engineering pioneer at Genentech (and Managing Partner at The Column Group), and Peter H. Svennilson (venture capitalist, Managing Partner at The Column Group). The Column Group was an investor in Exonics Therapeutics which was recently acquired by Vertex Pharmaceuticals (VRTX) for its CRISPR gene editing program in Duchenne Muscular Dystrophy, DMD.
- Merck partnership to license/develop key assets in the pipeline with favorable terms, like NGM’s option to receive 50% of the economic return from NGM313 program. Merck owns approx. 20% stake in NGM.
- Potential to combine NGM282 and NGM313 to treat the entire spectrum of NASH.
- Data readouts over next 12 months to continue price momentum.
Risks in this investment:
Investing in developmental stage biotechnology companies is risky and is suitable only for aggressive investors looking for high risk but high reward investments. Developmental stage biotechnology companies may have volatile stock prices and may not be suitable for risk-averse investors. NASH is a competitive and crowded area with various players and NGM may not be able to achieve significant market share. The advanced trials of NGM282 and NGM 313 may not be successful. Unexpected side effect may be seen in clinical trials. The company may also need to raise additional capital in the future, causing shareholder dilution.
This article represents my own opinion and is not a substitute for professional investment advice. It does not represent a solicitation to buy or sell any security. Investors should do their own research and consult their financial adviser before making any investment. Investing in equities, especially biotech stocks has the risk of significant losses and may not be suitable for all investors. While the sources of information and data in this article have been checked, their accuracy cannot be completely guaranteed.
I/we have no position in NGM but will buy the stock on Monday.