Climb Bio, Inc(CLYM) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section details Climb Bio's unaudited condensed consolidated financial statements and management's financial analysis Item 1. Condensed Consolidated Financial Statements (unaudited) Climb Bio's unaudited condensed consolidated financial statements, covering balance sheets, operations, equity, cash flows, and detailed notes Condensed Consolidated Balance Sheets Balance sheets show decreased total assets and equity, increased liabilities, driven by reduced cash and cash equivalents Condensed Consolidated Balance Sheets (thousands) | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | | :-------------------------- | :---------------------------- | :------------------------------ | :------------------- | | Total Assets | 192,386 | 217,187 | (24,801) | | Total Liabilities | 6,622 | 5,306 | 1,316 | | Total Stockholders' Equity | 185,764 | 211,881 | (26,117) | | Cash and cash equivalents | 22,682 | 87,229 | (64,547) | Condensed Consolidated Statements of Operations and Comprehensive Loss Net loss significantly reduced for Q2 and H1 2025, primarily due to the absence of a large acquired in-process R&D expense in 2024 Condensed Consolidated Statements of Operations and Comprehensive Loss (thousands) | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Loss | (8,666) | (54,889) | (29,447) | (56,586) | | Acquired in-process research and development, related party | — | 51,659 | — | 51,659 | | Research and development | 6,575 | 1,046 | 23,902 | 2,137 | | General and administrative | 4,102 | 3,667 | 9,793 | 5,581 | | Interest income | 2,173 | 1,485 | 4,460 | 2,826 | - Net loss decreased by $46,223 thousand for the three months ended June 30, 2025, and by $27,139 thousand for the six months ended June 30, 2025, compared to the respective periods in 2024, largely due to the absence of the $51,659 thousand acquired in-process R&D expense in 2025[17] Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity statements reflect changes from December 2024 to June 2025, driven by net losses, stock-based compensation, and unrealized gains Condensed Consolidated Statements of Stockholders' Equity (thousands) | Metric | December 31, 2024 ($ thousands) | June 30, 2025 ($ thousands) | | :-------------------------------- | :------------------------------ | :-------------------------- | | Total Stockholders' Equity | 211,881 | 185,764 | | Accumulated Deficit | (229,876) | (259,323) | | Additional Paid-in Capital | 441,727 | 444,762 | | Accumulated Other Comprehensive Income | 23 | 318 | - The accumulated deficit increased by $29,447 thousand from December 31, 2024, to June 30, 2025, reflecting the net loss for the six-month period[17][20] Condensed Consolidated Statements of Cash Flows H1 2025 cash flows show significant usage in operating and investing activities, contrasting with prior year's financing cash from a private placement Condensed Consolidated Statements of Cash Flows (thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash used in operating activities | (26,582) | (2,486) | | Net cash provided by (used in) investing activities | (37,965) | 4,106 | | Net cash provided by financing activities | — | 128,417 | | Net change in cash and cash equivalents | (64,547) | 130,028 | | Cash and cash equivalents at end of period | 22,682 | 223,140 | - Net cash used in operating activities increased by $24,096 thousand in H1 2025 compared to H1 2024, primarily due to a lower non-cash IPR&D charge in 2025[22][128][129] - Investing activities shifted from providing cash in H1 2024 to using $37,965 thousand in H1 2025, mainly due to increased purchases of marketable securities[22][130][131] Notes to Condensed Consolidated Financial Statements Detailed notes explain Climb Bio's operations, accounting policies, acquisitions, licensing, financial instruments, commitments, stock compensation, net loss per share, segments, and subsequent events 1. Nature of Operations and Basis of Presentation Climb Bio is a clinical-stage biotech developing budoprutug and CLYM116, acquired Tenet, licensed CLYM116, and has $259.3 million accumulated deficit but sufficient capital for 12 months - Climb Bio, Inc. is a clinical-stage biotechnology company developing therapeutics for patients with immune-mediated diseases, with a pipeline including budoprutug and CLYM116[24] - The company completed the acquisition of Tenet Medicines, Inc. on June 27, 2024, and entered into an exclusive license agreement with Beijing Mabworks Biotech Co., Ltd. for CLYM116 rights on January 8, 2025[25][26] - As of June 30, 2025, the company had an accumulated deficit of $259.3 million but believes its available cash, cash equivalents, and marketable securities of $187.4 million will be sufficient to meet operating requirements for at least the next twelve months[32][33] 2. Summary of Significant Accounting Policies Climb Bio, an emerging growth company, delays new accounting standards, reports no material policy changes, and details policies on credit risk, suppliers, foreign currency, and fair value measurements - The company is an emerging growth company and has elected to use the extended transition period for complying with new or revised accounting standards[34] - No material changes to the company's significant accounting policies were reported from the Annual Report on Form 10-K for the year ended December 31, 2024[35] - The company relies on single-source suppliers and manufacturers for certain critical materials, posing a risk if these third parties fail to meet obligations[38] - Financial assets and liabilities measured at fair value are classified into Level 1 (quoted prices in active markets) and Level 2 (observable inputs other than Level 1) of the fair value hierarchy[40][42] 3. Asset Acquisition and Private Placement with a Related Party Climb Bio acquired Tenet Medicines for $52.8 million on June 27, 2024, expensing $51.7 million as IPR&D, and raised $120.0 million from a concurrent private placement - The company completed the acquisition of Tenet Medicines, Inc. on June 27, 2024, which was accounted for as an asset acquisition[46][48] - Total consideration for the acquisition was $52.8 million, with $51.7 million allocated to in-process research and development (IPR&D) and expensed due to no future alternative use[48] - A concurrent private placement generated approximately $120.0 million in gross proceeds from the issuance of 31,238,282 shares of common stock[25][47] 4. Marketable Securities Climb Bio's available-for-sale marketable securities primarily include corporate bonds, U.S. Treasury securities, and U.S. government agency debt securities, with long-term maturities between one and two years as of June 30, 2025 Marketable Securities (thousands) | Type | Amortized Cost ($ thousands) | Unrealized Gain ($ thousands) | Unrealized Loss ($ thousands) | Estimated Fair Value ($ thousands) | | :-------------------------------- | :--------------------------- | :---------------------------- | :---------------------------- | :------------------------------- | | Short-term (June 30, 2025): | | | | | | Corporate bonds | 35,127 | 20 | (4) | 35,143 | | U.S. Treasury securities | 26,860 | 20 | (2) | 26,878 | | Total Short-term | 61,987 | 40 | (6) | 62,021 | | Long-term (June 30, 2025): | | | | | | Corporate bonds | 69,676 | 193 | (3) | 69,866 | | U.S. Treasury securities | 20,242 | 103 | — | 20,345 | | U.S. government agency debt securities | 12,500 | 1 | (10) | 12,491 | | Total Long-term | 102,418 | 297 | (13) | 102,702 | - Long-term marketable securities as of June 30, 2025, have contractual maturity dates between one and two years[49] 5. Fair Value Measurements Climb Bio measures financial assets at fair value, categorizing cash equivalents and U.S. Treasury securities as Level 1, and corporate bonds and U.S. government agency debt securities as Level 2, with no Level 3 transfers Fair Value Measurements at June 30, 2025 (thousands) | Asset Type | Level 1 ($ thousands) | Level 2 ($ thousands) | Level 3 ($ thousands) | Total ($ thousands) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :------------------ | | Fair Value Measurements at June 30, 2025: | | | | | | Cash equivalents: Money market funds | 22,072 | — | — | 22,072 | | Marketable securities: U.S. Treasury securities | 47,223 | — | — | 47,223 | | Marketable securities: Corporate bonds | — | 105,009 | — | 105,009 | | Marketable securities: U.S. government agency debt securities | — | 12,491 | — | 12,491 | | Total Assets | 69,295 | 117,500 | — | 186,795 | - Cash equivalents and U.S. Treasury securities are valued based on quoted market prices (Level 1), while corporate bonds and agency securities are valued using quoted prices for similar securities (Level 2)[51] 6. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities increased to $5.0 million as of June 30, 2025, from $4.1 million at December 31, 2024, primarily due to higher accrued external research and development expenses Accrued Expenses and Other Current Liabilities (thousands) | Category | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change ($ thousands) | | :-------------------------------------- | :------------------------------ | :------------------------------ | :------------------- | | Accrued external research and development expenses | 3,614 | 1,237 | 2,377 | | Accrued payroll and related expenses | 914 | 1,997 | (1,083) | | Accrued professional fees | 472 | 746 | (274) | | Other accrued expenses and current liabilities | 37 | 89 | (52) | | Total | 5,037 | 4,069 | 968 | 7. Commitments and Contingencies Climb Bio has office lease obligations and significant contingent payment obligations under license agreements for budoprutug and CLYM116, including development, regulatory, commercial milestones, and royalties - The company amended its office lease in April 2025, adding $0.2 million in fixed payments through 2026, with an option to extend through 2027 for an additional $0.1 million[53] - Under the Acelyrin Asset Purchase Agreement, the company is obligated to make payments of up to $157.5 million upon achievement of various development, regulatory, and commercial milestones for budoprutug, plus single-digit royalties[57] - The Mabworks Agreement for CLYM116 includes a $9.0 million upfront payment (recorded as R&D expense in Q1 2025), up to $30.0 million for development/regulatory milestones for the first indication, additional amounts for up to two more indications, and up to $832.0 million for commercial milestones, plus tiered royalties[63][65] - Milestone payments are recorded as expense when achievement is assessed as probable; as of June 30, 2025, $0.8 million was recorded for a ProBioGen milestone, but no other milestone expenses were recorded for Acelyrin, CRH, or Mabworks agreements[57][59][61][65] 8. Stock-Based Compensation Climb Bio operates multiple equity incentive plans and an Employee Stock Purchase Plan, with stock-based compensation expense significantly increasing in 2025 and $11.1 million in unrecognized cost for unvested awards - The company has outstanding awards under its 2019 and 2021 Equity Incentive Plans, and adopted a 2025 Inducement Plan for new employees[68][70] Outstanding Stock Options and Unvested Restricted Stock Units | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Outstanding Stock Options | 5,663,022 | 2,817,751 | | Unvested Restricted Stock Units | 627,710 | 1,228,876 | Stock-Based Compensation Expense (thousands) | Expense Category | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :-------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Research and development expenses | 521 | 287 | 1,427 | 556 | | General and administrative expenses | 492 | 225 | 1,608 | 421 | | Total Stock-Based Compensation Expense | 1,013 | 512 | 3,035 | 977 | - As of June 30, 2025, there was $11.1 million of total unrecognized compensation cost for unvested awards, and an additional $3.0 million for performance-based RSUs that became probable of vesting in August 2025[77] 9. Net Loss Per Share Climb Bio reported a net loss for all periods, resulting in identical basic and diluted net loss per share due to the anti-dilutive effect of potentially dilutive securities - The company has generated a net loss in all periods presented, making basic and diluted net loss per share identical as potentially dilutive securities would be anti-dilutive[78] Potentially Dilutive Securities | Potentially Dilutive Securities | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Stock options to purchase common stock | 5,663,022 | 2,834,181 | | Unvested restricted stock awards and units | 627,710 | 1,233,943 | | Total potentially dilutive shares | 6,290,732 | 4,068,124 | 10. Segments Climb Bio operates as a single segment focused on immune-mediated diseases, with R&D expenses disaggregated by program, showing significant increases in budoprutug and CLYM116 costs in 2025 - The company views its operations and manages its business as one operating and reportable segment, focused on developing therapeutics for patients with immune-mediated diseases[79] Direct Research and Development Expenses (thousands) | Direct Research and Development Expenses | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | Change ($ thousands) | | :--------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------- | | Budoprutug | 10,662 | 42 | 10,620 | | CLYM116 | 9,265 | — | 9,265 | | Legacy programs | 73 | 107 | (34) | | Personnel-related | 3,209 | 1,825 | 1,384 | | Other research and development expenses | 693 | 163 | 530 | | Total Research and Development Expenses | 23,902 | 2,137 | 21,765 | - CLYM116 expenses for the six months ended June 30, 2025, include a $9.0 million upfront payment and associated direct transaction costs related to the Mabworks Agreement[81] 11. Subsequent Events The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025, with potential impacts on federal tax law and other regulations, which the company is currently evaluating - The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025, after the reporting period[82] - The OBBBA includes significant changes to federal tax law and other regulatory provisions, the impact of which the company is currently evaluating[82] Item 2. Management's Discussion and Analysis of Financial Condition and Results and Operations This section provides management's perspective on Climb Bio's financial condition and results of operations, highlighting its clinical-stage status, recent acquisitions, operating expenses, liquidity, and future funding needs Overview Climb Bio is a clinical-stage biotech developing budoprutug and CLYM116, with significant operating losses and an accumulated deficit, but expects current capital to fund operations through 2027 - Climb Bio is a clinical-stage biotechnology company developing potential best-in-class therapeutics for immune-mediated diseases, with lead product candidate budoprutug and preclinical stage CLYM116[85][89][92] - The company received FDA clearance for Phase 2 clinical trial of budoprutug in pMN (March 2025) and IND clearances for Phase 1b in SLE (October 2024) and Phase 1b/2a in ITP (March 2025). A Phase 1 clinical trial for SC formulation of budoprutug is anticipated in H2 2025[91] - CLYM116 is currently in IND-enabling studies, with preclinical data expected in September 2025 and IND/CTA submission for IgAN anticipated in the second half of 2025[92] - The company incurred net losses of $8.7 million and $29.4 million for the three and six months ended June 30, 2025, respectively, with an accumulated deficit of $259.3 million as of June 30, 2025[94] - Existing cash, cash equivalents, and marketable securities of $187.4 million as of June 30, 2025, are estimated to fund planned operations through 2027[97] Tenet Acquisition On June 27, 2024, Climb Bio acquired Tenet Medicines, Inc. for $41.9 million in common stock, expensing $51.7 million as in-process research and development - Climb Bio acquired 100% of Tenet Medicines, Inc. on June 27, 2024, in exchange for 5,560,047 shares of common stock, valued at $41.9 million[98] - The acquisition was accounted for as an asset acquisition, with $51.7 million recognized as in-process research and development (IPR&D) expense[98] Mabworks Agreement On January 8, 2025, Climb Bio licensed CLYM116 rights from Mabworks, involving a $9.0 million upfront payment expensed as R&D, plus future milestone and royalty obligations - On January 8, 2025, Climb Bio entered into the Mabworks Agreement for exclusive rights to develop and commercialize CLYM116 outside of Greater China[99] - A $9.0 million upfront cash payment was made to Mabworks and included in research and development expenses for the first quarter of 2025[99] - The agreement includes obligations for additional payments upon achievement of specified development, regulatory, and commercial milestones, and low-to-mid single-digit tiered royalties on net sales[99] Components of Operating Results Operating expenses include R&D, acquired IPR&D, and G&A, all expected to increase, while other income primarily consists of interest earned on cash and marketable securities - Operating expenses are categorized into research and development, acquired in-process research and development (related party), and general and administrative expenses[100] - Research and development costs are expensed as incurred and are expected to increase substantially in the foreseeable future due to ongoing development activities[101][103] - General and administrative expenses, primarily personnel-related and professional fees, are also expected to increase to support growth and potential commercialization activities[108][109] Research and Development R&D expenses, including employee costs, preclinical/clinical development, manufacturing, facilities, and licensing, are expensed as incurred and are expected to increase significantly as product candidates advance - R&D expenses include employee-related costs, expenses for preclinical and clinical development (CROs, consultants), third-party manufacturing, facilities, and payments under licensing agreements[104] - Direct R&D expenses are tracked program-by-program, while indirect costs like employee and facility expenses are not allocated to specific programs[102] - R&D expenses are expected to increase substantially due to ongoing research, preclinical studies, and clinical trials, with timelines and costs being highly uncertain[103][104] Acquired In-Process Research and Development, Related Party Acquired IPR&D expense represents the fair value of consideration transferred in the Tenet Acquisition, allocated to R&D assets with no alternative future use - Acquired IPR&D expense consists of the fair value of consideration transferred in the Tenet Acquisition, allocated to R&D assets with no alternative future use[107] General and Administrative General and administrative expenses, primarily personnel-related costs, legal fees, and professional services, are expected to increase with company growth and potential commercialization - General and administrative expenses primarily include personnel-related costs (salaries, bonuses, stock-based compensation), legal fees, professional fees (accounting, audit, consulting), insurance, and investor relations[108] - These expenses are expected to increase as the company expands its headcount to support growth strategy and potential commercialization activities[109] Other Income (Expense) Other income primarily consists of interest earned on cash, cash equivalents, and marketable securities, while foreign currency loss accounts for exchange rate fluctuations - Interest income is derived from interest earned on cash, cash equivalents, and marketable securities[110] - Foreign currency loss results from the remeasurement of foreign currency transactions to the U.S. Dollar[111] Results of Operations This section compares Climb Bio's financial performance for Q2 and H1 2025 against 2024, detailing changes in operating expenses, other income, and net loss Comparison of the Three Months Ended June 30, 2025 and 2024 Net loss significantly decreased by $46.2 million in Q2 2025 due to the absence of a $51.7 million acquired IPR&D expense in Q2 2024, while R&D and G&A expenses increased Comparison of the Three Months Ended June 30, 2025 and 2024 (thousands) | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Change ($ thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------- | | Net Loss | (8,666) | (54,889) | 46,223 | | Research and development | 6,575 | 1,046 | 5,529 | | Acquired in-process research and development, related party | — | 51,659 | (51,659) | | General and administrative | 4,102 | 3,667 | 435 | | Interest income | 2,173 | 1,485 | 688 | - Research and development expenses increased by $5.5 million, primarily due to $4.5 million in costs for the budoprutug program related to clinical trial start-up and manufacturing[114] - General and administrative expenses increased by $0.4 million due to higher personnel-related expenses from increased headcount[116] Comparison of the Six Months Ended June 30, 2025 and 2024 Net loss decreased by $27.1 million in H1 2025 due to the absence of a $51.7 million acquired IPR&D expense in H1 2024, while R&D and G&A expenses significantly increased Comparison of the Six Months Ended June 30, 2025 and 2024 (thousands) | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | Change ($ thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------- | | Net Loss | (29,447) | (56,586) | 27,139 | | Research and development | 23,902 | 2,137 | 21,765 | | Acquired in-process research and development, related party | — | 51,659 | (51,659) | | General and administrative | 9,793 | 5,581 | 4,212 | | Interest income | 4,460 | 2,826 | 1,634 | - Research and development expenses increased by $21.8 million, including $10.6 million for the budoprutug program and $9.3 million for the CLYM116 program (primarily a $9.0 million upfront payment)[120] - General and administrative expenses increased by $4.2 million, driven by a $2.3 million increase in personnel-related expenses and a $1.2 million increase in legal expenses[122] Liquidity and Capital Resources This section discusses Climb Bio's liquidity, cash flow, future funding needs, and contractual obligations, noting reliance on equity financing and anticipated capital sufficiency through 2027 Sources of Liquidity Climb Bio primarily funds operations through equity sales, has no product revenue, and held $187.4 million in cash, cash equivalents, and marketable securities as of June 30, 2025 - The company has primarily funded operations through net proceeds from equity sales, including redeemable convertible preferred stock, an IPO, and a private placement in June 2024[125] - As of June 30, 2025, the company had $187.4 million in cash, cash equivalents, and marketable securities[125] - An Equity Distribution Agreement was entered into in March 2025 to sell up to $22.4 million in common stock via an at-the-market offering, but no shares were sold during the three and six months ended June 30, 2025[126] Cash Flows H1 2025 saw $26.6 million net cash used in operating activities and $38.0 million in investing, contrasting with H1 2024's $128.4 million provided by financing activities Cash Flow Activities (thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash used in operating activities | (26,582) | (2,486) | | Net cash provided by (used in) investing activities | (37,965) | 4,106 | | Net cash provided by financing activities | — | 128,417 | - Net cash used in operating activities for H1 2025 was $26.6 million, primarily from a net loss of $29.4 million, partially offset by non-cash charges and changes in operating assets/liabilities[128] - Net cash used in investing activities for H1 2025 was $38.0 million, mainly due to purchases of marketable securities, partially offset by maturities[130] - Net cash provided by financing activities for H1 2024 was $128.4 million, primarily from a private placement ($119.7 million) and stock option exercises ($8.7 million)[133] Funding Requirements Climb Bio's existing capital is estimated to fund operations through 2027, but increased expenses for product development and commercialization will necessitate substantial additional future capital - Existing cash, cash equivalents, and marketable securities are believed to be sufficient to fund operations through 2027, based on current operating plans[134] - Expenses are expected to increase for advancing product candidates, expanding corporate infrastructure, and potential commercialization, necessitating substantial additional capital in the future[134][135] - Failure to obtain necessary capital on acceptable terms could force delays, reductions, or termination of product development programs, commercialization efforts, or other operations[136] Contractual Commitments and Obligations Climb Bio has office lease obligations and contingent milestone and royalty payment obligations under asset purchase and license agreements, which are difficult to reliably estimate - The company has a lease agreement for office space with remaining fixed payments of $0.4 million through December 2026, and an option to extend for an additional $0.3 million through December 2027[139] - Obligations under asset purchase and license agreements for milestone and royalty payments are contingent upon future events (e.g., development, regulatory, commercial milestones, product sales) and cannot be reliably estimated for timing or likelihood[140] Critical Accounting Policies and Estimates Climb Bio's financial statements require management estimates and assumptions, with no material changes to critical accounting policies reported during Q2 or H1 2025 - The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures[141] - There were no material changes to the company's critical accounting policies during the three or six months ended June 30, 2025[142] Recently Issued Accounting Pronouncements Not Yet Adopted This section refers to Note 2 of the condensed consolidated financial statements for details on recently issued accounting pronouncements not yet adopted - Information regarding recently issued accounting pronouncements not yet adopted is provided in Note 2 to the unaudited condensed consolidated financial statements[143] Emerging Growth Company Status Climb Bio is an "emerging growth company" and "smaller reporting company" under the JOBS Act, allowing reduced reporting requirements until December 31, 2026, or earlier if financial thresholds are met - The company is an "emerging growth company" and a "smaller reporting company" as defined in the JOBS Act and Exchange Act, respectively[144] - This status allows the company to take advantage of exemptions from various reporting requirements, including the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act[144] - The company could remain an "emerging growth company" until December 31, 2026, or earlier if its aggregate market value of common stock held by non-affiliates exceeds $700 million[144] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Climb Bio, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is not required to provide quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company[145] Item 4. Controls and Procedures Management concluded Climb Bio's disclosure controls were ineffective as of June 30, 2025, due to material weaknesses in internal control over financial reporting, with remediation efforts underway - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting[147] - Identified material weaknesses include a lack of sufficient professionals with appropriate accounting knowledge and experience, and a lack of formal accounting policies, procedures, and controls[152] - Remediation efforts include hiring qualified personnel, designing and implementing improved policies and controls, and implementing financial systems to enhance segregation of duties and data reliability[153][154] - Despite the material weaknesses, management believes the unaudited condensed consolidated financial statements fairly present the company's financial condition, results of operations, and cash flows[148] Material Weaknesses in Internal Control Over Financial Reporting Climb Bio identified material weaknesses in internal control over financial reporting due to insufficient accounting personnel and a lack of formally designed policies and controls - Material weaknesses were identified due to a lack of sufficient professionals with appropriate accounting knowledge, training, and experience[152] - The company also lacked formally designed and maintained accounting policies, procedures, and controls for complete, accurate, and timely financial accounting, reporting, and disclosures, including segregation of duties[152] - These material weaknesses could result in a material misstatement of account balances or disclosures in annual or interim consolidated financial statements[150] Remediation Efforts to Address Material Weaknesses Remediation efforts include hiring qualified personnel, implementing improved policies and controls, formalizing procedures for complex transactions, and enhancing financial systems, with substantial progress reported - Remediation efforts include hiring qualified personnel with appropriate expertise and implementing improved policies, processes, and internal controls, including senior management review and audit committee oversight[153] - The company has formalized policies and controls to identify and assess complex accounting transactions and implemented financial systems to improve segregation of duties and data reliability[153][154] - Substantial progress has been made, but the effectiveness of these remediation steps will be concluded upon completion of efforts and subsequent evaluation[154] Changes in Internal Control over Financial Reporting No material changes in Climb Bio's internal control over financial reporting occurred during the quarter ended June 30, 2025 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[155] PART II. OTHER INFORMATION This section provides other information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits Item 1. Legal Proceedings As of the filing date, Climb Bio, Inc. was not involved in any material legal proceedings - The company is not party to any material legal matters or claims as of the date of filing this Quarterly Report[158] Item 1A. Risk Factors This section outlines numerous risks that could materially affect Climb Bio's business, financial condition, and results of operations, spanning financial, development, legal, third-party, IP, operations, and common stock aspects Risks Related to our Financial Position and Need for Additional Capital Climb Bio has significant losses and an accumulated deficit, requires substantial additional capital for product commercialization, and faces risks of dilution from equity offerings and insufficient funds for contingent obligations - The company has incurred significant operating losses since inception, with an accumulated deficit of $259.3 million as of June 30, 2025, and does not expect to generate revenue for the foreseeable future[161][162] - Future success is primarily dependent on regulatory approval and commercialization of product candidates, which will require substantial additional capital[167] - The company has significant potential future obligations under license agreements (Acelyrin, CRH, ProBioGen, Mabworks) for contingent development, commercial, sales, and regulatory milestones and royalties, which may materially harm development efforts if funds are insufficient[165][166] - Raising additional capital through equity offerings could dilute stockholders' ownership, while debt financing may involve restrictive covenants[170] Risks Related to our Business and the Development of our Product Candidates Climb Bio's success depends on regulatory approval and commercialization of budoprutug and CLYM116, a complex process with uncertain outcomes, facing risks from clinical trial results, adverse events, patient enrollment, intense competition, and FDA disruptions - The company's future success is primarily dependent on the regulatory approval and commercialization of budoprutug and CLYM116, a process that is lengthy, complex, expensive, and uncertain[179][210] - Preliminary, initial, or interim clinical trial results may change as more data become available and are not predictive of final results, potentially harming approval and commercialization efforts[208][209] - Product candidates may cause adverse events or undesirable side effects, leading to clinical trial delays, termination, restrictive labels, or denial of regulatory approval[225][226] - Difficulties in enrolling and retaining patients in clinical trials could result in significant delays, increased costs, or abandonment of development programs[229][232] - The company faces significant competition from major pharmaceutical and biotechnology companies with greater resources and expertise, which could lead to competitors achieving regulatory approval first or developing superior therapies[240][245][246] - Disruptions at the FDA and other government agencies (e.g., funding cuts, personnel losses, regulatory reform, government shutdowns) could hinder the ability to obtain guidance and timely approval of product candidates[259][260][263] Risks Related to Legal and Regulatory Compliance Climb Bio faces risks from evolving healthcare laws (e.g., IRA drug pricing, fraud and abuse, data privacy), which could increase costs, limit market access, or result in penalties, and expedited regulatory pathways do not guarantee faster approval - Enacted and future legislation, such as the Inflation Reduction Act (IRA), may increase the difficulty and cost of obtaining marketing approval, restrict post-approval activities, and affect product pricing and reimbursement[266][270][271] - The IRA's Medicare drug price negotiation program and inflation rebates could limit the expected return on product candidates and the full value of patents[271][273][277] - Business operations are subject to federal and state healthcare fraud and abuse laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA), with non-compliance potentially leading to substantial penalties, exclusion from government programs, and reputational harm[293][294][298] - The company is subject to stringent and evolving U.S. and foreign data privacy and security laws (e.g., HIPAA, CCPA, GDPR), with actual or perceived failures leading to regulatory investigations, litigation, fines, and business disruptions[301][303][307][315][316] - While the company may seek expedited designations (Breakthrough Therapy, Fast Track, Priority Review, PRIME), receipt is not guaranteed and does not assure faster development, review, or ultimate approval[318][324][325][326] - Accelerated approval, if granted, requires post-marketing confirmatory trials and may be withdrawn if predicted clinical benefits are not verified or conditions are not met[329][332][334] - Orphan drug designation for budoprutug in pMN may not guarantee market exclusivity or full benefits, as exclusivity can be waived or lost under certain circumstances, and regulations may change[339][342][343][344][345] Risks Related to our Dependence on Third Parties Climb Bio heavily relies on third parties for development and manufacturing, facing risks from their failures, supply disruptions, and inability to secure new collaborations, compounded by uncertainties in U.S. and international trade policies, especially with China - The company relies on third-party CROs to conduct, supervise, and monitor preclinical studies and clinical trials, which reduces control over these activities and poses risks if they fail to perform or meet deadlines[365][366][368] - Reliance on third-party, including single-source, manufacturers for product candidate materials increases the risk of insufficient quantities, unacceptable costs, or supply disruptions, which could delay development or commercialization[378][379][386] - The company is dependent on third parties for raw materials, and loss of key suppliers or supply disruptions could impede development, manufacturing, and marketing efforts[393][395][396] - Future product development and commercialization may require additional collaborations, which are competitive and may not be available on acceptable terms, potentially altering development plans[397][399][402] - Uncertainty surrounding U.S. and international trade policies, particularly with China (e.g., tariffs, proposed BIOSECURE Act targeting Chinese biotechnology companies), may adversely impact business by disrupting supply chains and restricting partnerships with foreign vendors like WuXi and Mabworks[404][406][407][408] Risks Related to Intellectual Property Climb Bio heavily relies on in-licensed IP, facing risks of license termination, patent challenges, and infringement claims, with global protection being expensive and uncertain, and patent terms potentially inadequate - The company heavily relies on patents, know-how, and other intellectual property licensed from third parties (e.g., CRH for budoprutug, Mabworks for CLYM116)[411] - Failure to comply with obligations under license agreements could lead to termination of licenses, loss of important intellectual property rights, and inability to develop or commercialize product candidates[413] - There is no assurance that current or future patent applications (14 pending U.S. provisional for budoprutug, one in-licensed PCT for CLYM116) will result in issued patents or provide competitive advantage[418][420] - Issued patents may be challenged, invalidated, narrowed, or held unenforceable by third parties, leading to loss of exclusivity or freedom to operate[421][426][443] - Reliance on third parties for development and manufacturing increases the risk of trade secret discovery, misappropriation, or unauthorized disclosure, which would harm the company's competitive position[446][447][449][514][515] - The company may become involved in lawsuits to protect or enforce its patents, or face claims of infringing third-party intellectual property rights, which are expensive, time-consuming, and could result in substantial damages or injunctions[450][451][501][502][505][506] - Patent terms may be inadequate to protect the company's competitive position for an adequate amount of time due to the lengthy development and regulatory review processes[481][483][490] Risks Related to our Business Operations and Employee Matters Climb Bio faces risks from cyberattacks, dependence on key personnel, employee misconduct, international operations, limitations on NOL carryforwards, and challenges associated with growth through acquisitions or investments - Information technology systems and data are vulnerable to cyberattacks, malicious activity, and security incidents, which could lead to unauthorized data access/loss, material disruption of development programs, regulatory investigations, litigation, fines, and reputational harm[526][527][528][533][538][542] - The company is highly dependent on attracting and retaining qualified managerial, scientific, and medical personnel; the loss of key individuals could impede development and business plans[545][546] - The company is exposed to the risk of fraudulent conduct or other illegal activity by employees, independent contractors, and third parties, including non-compliance with regulatory standards and healthcare fraud and abuse laws[547][548] - Any international operations expose the company to business, regulatory, political, operational, financial, pricing, and reimbursement risks associated with doing business outside the U.S.[551] - The company may not be able to fully utilize its net operating loss (NOL) carryforwards due to "ownership change" rules under Sections 382 and 383 of the Internal Revenue Code, potentially increasing future tax obligations[553][555] - Growth through acquisitions or investments (e.g., Tenet acquisition, Mabworks Agreement) involves numerous risks, including integration difficulties, unanticipated costs, diversion of management attention, and potential dilution of stockholders[556][558][560] Risks Related to our Common Stock Climb Bio's common stock price is volatile, with no anticipated dividends, and faces risks from substantial share sales, anti-takeover provisions, concentrated ownership, material weaknesses in internal controls, and exclusive forum provisions - The trading price of the company's common stock has been volatile and may continue to be influenced by factors such as clinical trial results, regulatory decisions, market conditions, and analyst reports[561][563] - The company does not anticipate paying cash dividends, making capital appreciation the sole source of gain for stockholders in the foreseeable future[565] - Sales of a substantial number of common shares into the public market, including those from equity compensation plans and private placements, could cause the market price to decline significantly and dilute existing stockholders' ownership[568][570][571] - Anti-takeover provisions in charter documents and Delaware law could make an acquisition more difficult and limit attempts by stockholders to replace or remove current management[573][575] - Concentration of ownership among executive officers, directors, and principal stockholders (e.g., RA Capital Management L.P. with 46.4%) may limit new investors' influence and reduce the public float, potentially depressing the stock price[580][581] - Identified material weaknesses in internal control over financial reporting, if not remediated, could impair the ability to produce accurate financial statements and adversely affect the business and stock price[582][585][587] - Exclusive forum provisions in the amended certificate of incorporation designate specific judicial forums for disputes, potentially restricting stockholders' ability to choose a favorable forum and increasing litigation costs[588][589][591] General Risk Factors Climb Bio faces general risks including potential securities litigation, limited equity analyst coverage, unfavorable global economic conditions, and the impact of its "emerging growth company" and "smaller reporting company" status on investor attractiveness - The company may become involved in securities litigation or stockholder derivative litigation, which is expensive and diverts management's attention and resources[593][595] - Limited equity analyst coverage may adversely affect the market price and trading volume of the common stock[596][597] - Unfavorable global economic conditions, including volatility, inflation, and geopolitical events, could adversely affect the business, financial condition, and ability to raise additional capital[598][599][601] - Being an "emerging growth company" and "smaller reporting company" allows for reduced reporting requirements, which may make the common stock less attractive to some investors, potentially leading to less active trading and more volatile prices[602][603] - Changes in tax laws or regulations, such as the OECD Pillar Two rules, could adversely affect the company's domestic and international business operations and financial performance[605][606] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Climb Bio, Inc. reported no unregistered sales of equity securities or use of proceeds during the period covered by this Quarterly Report - No unregistered sales of equity securities or use of proceeds were reported for the period[607] Item 3. Defaults Upon Senior Securities This item is not applicable to Climb Bio, Inc. for the current reporting period - This item is not applicable[608] Item 4. Mine Safety Disclosures This item is not applicable to Climb Bio, Inc. for the current reporting period - This item is not applicable[609] Item 5. Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during Q2 2025 - No Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the three months ended June 30, 2025[610] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including key agreements, certifications from executive officers, and XBRL documents - Exhibits include the Agreement and Plan of Merger and Reorganization, an Offer Letter, a Separation and Release of Claims Agreement, certifications of principal executive and financial officers, and Inline XBRL documents[613] Signatures The Quarterly Report on Form 10-Q is signed by Climb Bio's President and CEO, Aoife Brennan, and SVP of Finance, Cindy Driscoll, on August 12, 2025 - The report is signed by Aoife Brennan, President and Chief Executive Officer (Principal Executive Officer), and Cindy Driscoll, Senior Vice President, Finance (Principal Financial Officer)[618] - The signing date for the report is August 12, 2025[618]