SCHEDULE 13G/A: Redmile Group Discloses 9.9% Stake in RAPT Therapeutics, Capped by Ownership Limitation

Redmile Group, LLC and its affiliates have disclosed a 9.9% beneficial ownership stake in RAPT Therapeutics, Inc., totaling 13,932,449 shares, subject to a 9.99% beneficial ownership limitation on warrant exercises.

Summary

• Redmile Group, LLC, Jeremy C. Green, and Redmile Biopharma Investments III, L.P. have filed an Amendment No. 3 to Schedule 13G regarding their beneficial ownership in RAPT Therapeutics, Inc.
• Redmile Group, LLC and Jeremy C. Green each report beneficial ownership of 13,932,449 shares of RAPT Therapeutics Common Stock, representing 9.9% of the class.
• This ownership includes 6,475,317 shares directly held by Redmile Funds and a portion of 15,659,456 shares issuable upon exercise of pre-funded warrants.
• Redmile Biopharma Investments III, L.P. reports beneficial ownership of 7,559,323 shares, representing 5.4% of the class, comprising 102,191 directly held shares and a portion of the warrants.
• A "Beneficial Ownership Limitation" (Blocker) prevents the exercise of warrants if it would result in ownership exceeding 9.99% of the outstanding Common Stock. This limitation can be changed with 61 days' notice.
• The percentage ownership calculation is based on 34,958,253 shares outstanding as of November 7, 2024, adjusted for 2,951,425 shares exchanged for pre-funded warrants as of December 23, 2024, plus 100,000,000 shares issued in a private placement as of December 27, 2024, and 7,457,132 shares issuable from warrants due to the limitation.

Sentiment

Score: 6

Explanation: The document is a routine regulatory filing disclosing beneficial ownership. The significant stake by Redmile Group is generally positive, indicating institutional confidence, but the ownership limitation and recent large private placement (dilution) are neutral to slightly negative factors for existing shareholders.

Positives

• Significant investment by a specialized biopharma investment group (Redmile Group) indicates confidence in RAPT Therapeutics.
• The holding of pre-funded warrants suggests a long-term investment strategy, as these can be exercised in the future.

Negatives

• The 9.99% beneficial ownership limitation restricts the immediate full exercise of warrants, potentially limiting the reporting persons' ability to increase their stake beyond this threshold without prior notice.

Risks

• Beneficial Ownership Limitation: The 9.99% "Beneficial Ownership Blocker" prevents the full exercise of warrants if it would cause the holder's ownership to exceed this threshold, potentially limiting the investor's flexibility or influence.
• Dilution: The calculation of outstanding shares includes 100,000,000 shares issued in a private placement, indicating significant recent dilution for existing shareholders.

Future Outlook

The document primarily details current ownership and does not provide forward-looking statements about RAPT Therapeutics' business or financial performance. It notes that the 9.99% beneficial ownership limitation on warrant exercise can be changed by the holder with 61 days' notice, indicating a potential future increase in ownership beyond the current cap.

Industry Context

This filing indicates continued investment by a specialized biopharma fund in a biotechnology company. Such significant stakes by institutional investors are common in the biotech sector, where long-term capital and strategic partnerships are crucial for drug development and commercialization. The presence of pre-funded warrants and ownership limitations is also a common mechanism in private placements to manage ownership thresholds and regulatory compliance.

Comparison to Industry Standards

• The 9.99% beneficial ownership limitation is a common practice in investment agreements, particularly in the biotech sector, to prevent triggering certain regulatory thresholds (e.g., Schedule 13D filing requirements, or change of control provisions) that apply at 10% ownership or higher.
• The use of pre-funded warrants is a standard financing tool, often employed in private placements (PIPEs) to raise capital while managing immediate dilution and allowing investors flexibility in exercising their stake.
• The significant private placement of 100,000,000 shares suggests a substantial capital infusion for RAPT Therapeutics, which is typical for biotech companies requiring funding for R&D and clinical trials.

Corporate Governance

Stakeholder Impact

• Shareholders: The significant beneficial ownership by Redmile Group indicates institutional confidence. However, the recent private placement of 100,000,000 shares implies substantial dilution for existing shareholders. The beneficial ownership limitation affects how Redmile Group's stake can grow.

Next Steps

• The Beneficial Ownership Limitation may be changed at the holder's election upon 61 days' notice to the Issuer, potentially leading to an increase in the reported beneficial ownership percentage in the future.

Key Dates

Keywords

RAPT Therapeutics, Redmile Group, Schedule 13G, beneficial ownership, common stock, pre-funded warrants, biopharma investment, institutional ownership, SEC filing, ownership limitation, private placement