SCHEDULE: RA Capital Adjusts Climb Bio Stake, Converts Shares to Warrants

RA Capital Management and affiliated funds have amended their Schedule 13D filing for Climb Bio, Inc., converting a significant portion of common stock into pre-funded warrants and detailing recent open market purchases.

Summary

• RA Capital Management and its affiliated entities (RA Capital Healthcare Fund, RA Capital Nexus Fund III, Sera Medicines, LLC, Peter Kolchinsky, and Rajeev Shah) collectively reported beneficial ownership of 17,953,284 shares of Climb Bio, Inc. common stock, representing 33.0% of the outstanding class.
• On December 11, 2025, RA Capital Healthcare Fund exchanged 20,440,000 shares of Climb Bio common stock for Pre-Funded Warrants to purchase an equivalent number of shares.
• The Pre-Funded Warrants have an exercise price of $0.0001 per share, are immediately exercisable, and do not expire, but include a beneficial ownership blocker preventing exercise if it would result in ownership exceeding 33.0%.
• The Fund made open market purchases of 213,099 shares on December 11, 2025, at a weighted-average price of $2.18 per share, totaling $464,647.
• An additional 101,462 shares were purchased on December 12, 2025, at a weighted-average price of $2.86 per share, totaling $290,120.
• RA Capital and the Fund have agreed to vote any shares exceeding 33.0% of total voting power in proportion to the votes of all other stockholders.

Sentiment

Score: 6

Explanation: The filing reflects a strategic adjustment by a major investor, RA Capital, in its stake in Climb Bio. The conversion to pre-funded warrants suggests a desire to maintain long-term economic exposure and flexibility while managing regulatory thresholds. The recent open market purchases indicate continued, albeit measured, confidence. There are no overtly negative or positive operational announcements from Climb Bio itself, making the sentiment neutral to slightly positive due to continued investor interest.

Positives

• The conversion to Pre-Funded Warrants allows RA Capital to maintain a significant economic interest in Climb Bio while potentially reducing its reported beneficial ownership percentage, offering flexibility.
• The Pre-Funded Warrants have a very low exercise price ($0.0001) and no expiration date, providing long-term upside potential without immediate capital outlay for the full share amount.
• Recent open market purchases by the Fund at prices ranging from $2.11 to $3.00 indicate continued confidence in the company's valuation at these levels.

Negatives

• The beneficial ownership blocker at 33.0% limits RA Capital's ability to increase its voting power beyond this threshold, potentially restricting its influence on corporate decisions.
• The exchange of common stock for warrants, while providing flexibility, might be interpreted as a move to manage reporting requirements rather than a direct increase in conviction through outright share purchases.

Risks

• The beneficial ownership blocker in the Pre-Funded Warrants limits the ability of RA Capital and its affiliates to increase their voting control beyond 33.0%, potentially impacting their strategic influence.
• The value of the Pre-Funded Warrants is tied to the future performance of Climb Bio's common stock, exposing RA Capital to market price fluctuations.

Future Outlook

The filing indicates that RA Capital may exchange additional common stock for Pre-Funded Warrants in the future, subject to certain terms and the Issuer's written consent, suggesting a potential ongoing strategy to manage their equity position.

Industry Context

This filing reflects a common strategy among institutional investors, particularly in the biotechnology sector, to manage their equity stakes in portfolio companies. Converting common stock to pre-funded warrants can allow an investor to maintain economic exposure and potential upside while managing regulatory reporting thresholds (like 13D/G filing requirements) and avoiding immediate voting control issues. The 'beneficial ownership blocker' is a standard feature in such warrants to prevent triggering certain ownership thresholds.

Comparison to Industry Standards

• The use of Pre-Funded Warrants with a beneficial ownership blocker is a standard financial instrument employed by institutional investors, such as hedge funds and venture capital firms, to manage their equity exposure and regulatory reporting obligations in public companies, particularly in growth-oriented sectors like biotech.
• Similar strategies have been observed with other biotech investors like Perceptive Advisors or Orbimed, who frequently utilize warrants or convertible notes to structure their investments, allowing for flexibility in capital deployment and ownership management without immediately impacting the public float or triggering hostile takeover concerns.
• The 33.0% beneficial ownership blocker is a common threshold, often chosen to stay below levels that might trigger certain corporate governance provisions or change-of-control clauses in agreements.

Corporate Governance

Related Party Transactions

• RA Capital Management, L.P. serves as investment adviser for RA Capital Healthcare Fund, L.P., RA Capital Nexus Fund, L.P., RA Capital Nexus Fund II, L.P., RA Capital Nexus Fund III, L.P., and a separately managed account.
• RA Capital Healthcare Fund, L.P. and RA Capital Nexus Fund III, L.P. collectively own approximately 75% of the outstanding equity interests of Sera Medicines, LLC.
• Dr. Levin holds 50,000 vested stock options for the benefit of RA Capital.

Stakeholder Impact

• Shareholders: The conversion to warrants and the voting agreement could stabilize the perception of RA Capital's long-term commitment while limiting its immediate voting control, potentially reducing concerns about a concentrated voting block. The continued purchases suggest positive sentiment.
• Management (Climb Bio): The voting agreement ensures that RA Capital's influence beyond 33% aligns with the broader shareholder base, potentially fostering a more collaborative relationship rather than an activist stance.

Next Steps

• RA Capital may exchange additional shares of common stock for Pre-Funded Warrants in the future, subject to the Issuer's written consent.

Key Dates

Recommendation

The filing primarily details a strategic restructuring of a major investor's stake rather than new operational or financial performance data for Climb Bio. While RA Capital's continued investment and recent purchases suggest confidence, the conversion to warrants and the voting agreement indicate a nuanced approach to ownership and influence. Without additional information on Climb Bio's underlying business performance or strategic direction, a 'hold' recommendation is appropriate, advising investors to maintain their current position while awaiting further company-specific news. The filing does not present a clear catalyst for a strong buy or sell.

Keywords

Climb Bio Inc, RA Capital Management, Schedule 13D, Beneficial Ownership, Pre-Funded Warrants, Exchange Agreement, Biotechnology, Investment Fund, SEC Filing, Equity Stake