Merck & Co., Inc. (NYSE:MRK) made an intrepid move as it announced its plans for investing as much as $450 million in a small biotech firm, NGM Pharmaceuticals. The company is based in South San-Francisco and is now a part of a grand collaboration with Merck. Merck believes that the biotech firm is capable of developing therapies for chronic ailments that affect a vast population of the country. Merck has promised an investment of $450 million in cash, of which $94 million will be provided as upfront cash payment.
Last month, Merck had surprised the market and analysts by announcing a $100 million investment in the futuristic messenger RNA treatments. This time, it is seen to make an investment more than four times the capacity of its previous bet. Merck & Co., Inc. (NYSE:MRK) is seeking to invest $450 million in cash in a little-known biotech company, NGM. Merck said that NGM has the potential to develop novel biotech drugs to treat diseases like nonalcoholic steatohepatitis (NASH), obesity and diabetes.
As part of the deal, Merck has offered NGM $94 million as an upfront payment in cash, according to an article. The company will additionally receive a $106 million sum for a 15% equity stake that is estimated to cost Merck around $705 million. Apart from this, Merck has also agreed to pay $50 million per year for the next five years to NGM. This money will be invested to aid the R&D at the small biotech firm, with a potential of a joint venture agreement in the future.
NGM is a small biotech company with only approximately 80 employees. However, it enjoys 100% ownership of the most advanced drug in the treatment of NASH and primary biliary cirrhosis. The drug, NGM282, is currently in the middle stages of clinical trials for the aimed purposes. Merck & Co., Inc. (NYSE:MRK) has also lured interests for investments by several other industry giants.