On Tuesday, NGM Biopharmaceuticals (NASDAQ:NGM) was downgraded by a Citi analyst from Buy to Neutral. The downgrade comes with a lowered price target to $1.55 from the previous $6.00. This change follows the recent announcement that NGM has entered into a merger agreement with affiliates of The Column Group, its largest shareholder.
The merger, which is set to close in the second quarter of 2024, will result in NGM Biopharmaceuticals becoming a privately held company. Consequently, the firm will be delisted from the Nasdaq. The deal is valued at approximately $135 million, with the acquisition price set at $1.55 per share.
The Citi analyst noted that the merger did not come as a surprise, given that The Column Group had already expressed its intention to acquire NGM in December of the previous year. The analyst also mentioned that there appears to be minimal risk of the deal not reaching completion.
The implications of the merger for NGM shareholders are significant, as the company's transition to a private entity marks the end of its public trading on the Nasdaq. The revised price target reflects the terms of the merger agreement and the anticipated final equity value of the company.
InvestingPro Insights
Following the recent downgrade by a Citi analyst and ahead of NGM Biopharmaceuticals' transition to a privately held company, let's delve into some key financial metrics and insights that could influence investor perceptions. NGM currently has a market capitalization of $127.28 million, with a notably low price-to-book ratio of 0.75 as of the last twelve months ending Q3 2023. This suggests that the company's stock is trading at less than the net asset value, which might be a point of interest for value investors.
Despite the impending privatization, NGM's financial health as indicated by its balance sheet shows that it holds more cash than debt, providing some solace regarding the company's liquidity. This is reinforced by the fact that NGM's liquid assets exceed its short-term obligations, as per InvestingPro Tips. However, the company's gross profit margin stands at an alarming -519.89%, reflecting significant costs relative to its revenue. This is further highlighted by a substantial annual revenue decline of -61.4%, pointing to a challenging operational environment.
Investors should also note that NGM has been quickly burning through cash, and analysts do not expect the company to be profitable this year. Nonetheless, NGM has experienced a strong return over the last three months, with a 111.81% price total return, potentially indicating short-term investor optimism.
For those looking for a more comprehensive analysis, there are additional InvestingPro Tips available, which can provide deeper insights into NGM's financials and projections. Interested readers can access these tips and take advantage of the special offer using coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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