Our price target for NGM is $1.55 per share, derived by performing a discounted cash flow (DCF) analysis where we project probability-adjusted free cash flows (FCF) explicitly through 2040. We then discount cash flows by 15% annually. Within our coverage, we utilize a 15% discount rate for companies that have not yet demonstrated clinical proof-of-concept (POC). We utilize a -25% terminal growth rate to account for patent expiration for a biologic balanced with pipeline potential from NGM’s discovery engine.

We rate NGM High Risk based on the usual volatility of biotech stocks and uncertainty/risk associated with clinical trials and drug development.

NGM has many of the risks frequently associated with biotech companies. Share performance is closely linked to clinical and regulatory updates, and therefore any updates that fall short of expectations could impact the ability of shares to reach our target price. In particular, we note that NGM carries risk related to its pending merger agreement closing.