Vor Biopharma Inc.: Form 10-Q for the period ended Mar 31, 2024

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section titled “Risk Factors” in our 2023 Annual Report and in other reports we have filed or may file with the SEC, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Vor Bio is a clinical-stage company harnessing the power of cell and genome engineering to develop potentially transformative therapies in acute myeloid leukemia (“AML”), a devastating disease with few treatment options. AML is the most common type of acute leukemia in adults and one of the deadliest and most aggressive blood cancers, affecting approximately 20,000 newly diagnosed patients each year in the United States.

Leveraging our expertise in HSC biology and genome engineering, we genetically modify HSCs to remove surface targets and then provide these cells as hematopoietic cell transplants (“HCTs”) to patients. Once these cells engraft into bone marrow, the patient’s healthy cells are shielded because they no longer express the surface target, leaving only the cancerous cells exposed. We believe this will unlock the potential of targeted therapies to selectively destroy cancerous cells while shielding healthy cells. As a result, our shielded transplants are designed to limit the on-target toxicities associated with these targeted therapies, thereby enhancing their utility, and broadening their applicability. We intend to pair our shielded transplants with targeted therapeutics such as VCAR33ALLO, a chimeric antigen receptor (“CAR”)-T therapy designed to target CD33, to bring potentially transformative outcomes to patients and establish a new standard of care Treatment System in AML.

We are developing trem-cel, a shielded transplant, which we believe has the potential to transform the treatment for AML. Trem-cel is created by genetically modifying healthy donor HSCs in order to remove the CD33 surface target. We intend to develop trem-cel as a HCT product candidate to replace the standard of care in transplant settings. We are actively enrolling and treating patients in VBP101, our first-in-human Phase 1/2a trial of trem-cel in combination with Mylotarg. We released clinical data for this trial most recently in December 2023. The data showed that primary neutrophil engraftment occurred in all eight patients treated with trem-cel. Three out of three patients treated with Mylotarg experienced hematologic protection from deep cytopenias through repeat doses, suggesting that trem-cel transplants shielded patients’ healthy cells from the on-target toxicity typically seen with Mylotarg treatment. We expect to release additional engraftment and hematologic protection data in the second half of 2024. If successful, this trial will provide important validating evidence of the potential of trem-cel and our broader approach.

VCAR33ALLO is manufactured from lymphocytes collected from the patient’s original transplant donor, generating a CAR-T cell product that is exactly matched to the recipient’s engrafted blood system. By using healthy transplant donor cells as the starting material to produce VCAR33ALLO, the CAR-T cells have a more stem-like phenotype, leading to greater potential for expansion, persistence, and anti-leukemia activity compared to a product derived from a patient’s own lymphocytes. In January 2024 we dosed the first patient with VCAR33ALLO in VBP301 and expect to treat multiple additional patients in the first half of 2024. We expect to report initial data in the second half of 2024.

We believe that the combination of trem-cel followed by treatment with VCAR33ALLO in the post-transplant setting, which we refer to as the trem-cel + VCAR33 Treatment System, may transform patient outcomes and offer the potential for cures for patients that have limited treatment options. The trem-cel + VCAR33 Treatment System would utilize the same healthy donor allogenic cell source for both trem-cel and VCAR33ALLO. We plan to collect initial data on trem-cel from the VBP101 clinical trial and initial clinical data from the VCAR33ALLO program prior to IND submission for the trem-cel + VCAR33 Treatment System. However, the VBP301 protocol allows for patients who have received a trem-cel transplant on the VBP101 study to enroll in VBP301 and receive VCAR33ALLO. This may provide valuable early insights into the potential of the trem-cel + VCAR33 Treatment System to enable a more potent therapy and durable responses post-transplant.

We operate an in-house clinical manufacturing facility in Cambridge, Massachusetts to support development of our shielded transplants and CAR-T therapeutic candidates for patients with blood cancers. While this facility is now operational, we continue to rely on third-party contract manufacturers for our required raw materials, manufacturing devices, active pharmaceutical ingredients and finished product for our research and clinical manufacturing. Since our inception in December 2015, we have devoted substantially all of our resources to raising capital, organizing and staffing our company, business and scientific planning, conducting discovery and research activities, acquiring or discovering product candidates, establishing and protecting our intellectual property portfolio, developing and progressing our product candidates and preparing for clinical trials, establishing arrangements with third parties for the manufacture of our product candidates and component materials, building out our internal clinical manufacturing facility, and providing general and administrative support for these operations. We do not have any product candidates approved for sale and have not generated any revenue from product sales. Through March 31, 2024, we funded our operations primarily through the sale of equity securities and debt financings and have received aggregate net proceeds from these transactions of approximately $464.3 million.

We have incurred significant operating losses since inception, including net losses of $30.8 million for the three months ended March 31, 2024 and $117.9 million for the year ended December 31, 2023. As of March 31, 2024, we had an accumulated deficit of $370.9 million.

As of March 31, 2024, we had cash, cash equivalents and marketable securities of $107.5 million. We expect that our cash, cash equivalents and marketable securities at March 31, 2024 will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2025.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of our condensed consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, costs, and expenses, and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates, if any, will be reflected in the condensed consolidated financial statements prospectively from the date of change in estimates. There have been no material changes to our critical accounting estimates from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Annual Report.

Financial Operations Overview

Revenue

We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all. If our development efforts for our product candidates are successful and result in marketing approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such agreements.

Expenses

Research and Development Expenses

Research and development expenses consist primarily of external and internal expenses incurred in connection with our research and development activities, including our drug discovery efforts and the development of our product candidates. External expenses include:

• research and development expenses incurred under agreements with CROs and other scientific development services;
• costs of consultants, including their fees and related travel expenses;
• costs related to compliance with quality and regulatory requirements;
• costs of laboratory supplies and acquiring and developing preclinical and clinical trial materials, including expenses associated with our CMOs; and
• payments made under third party licensing agreements.

Internal expenses include:

• personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expenses, for employees involved in research and development activities; and
• facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, insurance, and other internal operating costs, and internal manufacturing expenses.

We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our condensed consolidated financial statements as prepaid expenses or accrued research and development expenses. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative future use for the research and development. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

A significant portion of our research and development costs have been external costs, which we track by stage of development, preclinical or clinical. However we do not track our internal research and development expenses on a program specific basis because these costs are deployed across multiple projects and, as such, are not separately classified.

Research and development activities are central to our business model. We expect that our research and development expenses will increase significantly for the foreseeable future as we continue to identify and develop product candidates, particularly as more of our product candidates move into clinical development and later stages of clinical development.

The successful development of our product candidates in the future is highly uncertain. Therefore, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development and commercialization of any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of our product candidates, if approved. This is due to the numerous risks and uncertainties associated with developing product candidates, many of which are outside of our control, including the uncertainty of:

• the timing and progress of preclinical and clinical development activities;
• the number and scope of preclinical and clinical programs we decide to pursue;
• our ability to maintain our current research and development programs and to establish new ones;
• establishing an appropriate safety profile with IND-enabling studies;
• the number of sites and patients included in the clinical trials;
• the countries in which the clinical trials are conducted;
• per patient trial costs;
• successful patient enrollment in, and the initiation of, clinical trials, as well as drop out or discontinuation rates or complications with donors;
• the successful completion of clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;
• the number of trials required for regulatory approval;
• the timing, receipt and terms of any regulatory approvals from applicable regulatory authorities;
• our ability to establish new licensing or collaboration arrangements;
• the performance of our current and future collaborators, if any;
• establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
• significant and changing government regulation and regulatory guidance;
• the impact of any business interruptions to our operations or to those of the third parties with whom we work;
• obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;
• launching commercial sales of our product candidates, if approved, whether alone or in collaboration with others; and
• maintaining a continued acceptable safety profile of the product candidates following approval.

Any changes in the outcome of any of these variables could mean a significant change in the costs and timing associated with the development of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs, including salaries, bonuses, benefits and stock-based compensation expenses for employees involved in our executive, finance, corporate, business development and administrative functions, as well as expenses for outside professional services, including legal, audit, accounting and tax-related services and other consulting fees, facility-related expenses, which include depreciation costs and other allocated expenses for rent and maintenance of facilities, insurance costs, recruiting costs, travel expenses and other general administrative expenses.

We expect that our general and administrative expenses will increase as our business expands and we hire additional personnel to support our continued research and development activities, including our clinical programs.

Other Income

Interest Income

Interest income consists of interest income earned on our cash, cash equivalents and marketable securities held in financial institutions.

Results of Operations

Comparison of Three Months Ended March 31, 2024 and 2023

The following table summarizes our results of operations for the periods indicated (amounts in thousands):

Research and Development Expenses

The following table summarizes our research and development expenses incurred for the periods indicated (amounts in thousands):

Research and development expenses were $24.3 million for the three months ended March 31, 2024, compared to $21.9 million for the three months ended March 31, 2023. The increase of $2.4 million was primarily attributable to an increase in personnel-related costs driven by additional headcount to support our clinical and manufacturing activities, an increase in manufacturing costs to support our trem-cel and VCAR33ALLO programs, and an increase in clinical costs, partially offset by a decrease in preclinical research costs.

General and Administrative Expenses

General and administrative expenses were $8.0 million for the three months ended March 31, 2024, compared to $8.5 million for the three months ended March 31, 2023. The decrease of $0.5 million was primarily due to a decrease in consulting and legal expenses, partially offset by an increase in personnel costs.

Other Income

Other income decreased by $0.5 million during the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The decrease in other income was due to decreases in interest earned from our cash, cash equivalents and marketable securities.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have not recognized any revenue and have incurred operating losses and negative cash flows from our operations. We have not yet commercialized any product and we do not expect to generate revenue from sales of any products for several years, if at all. We have funded our operations primarily through the sale of equity securities and have received aggregate net proceeds from financing transactions of approximately $464.3 million as of March 31, 2024.

In order to fund our future operations, including our planned clinical trials, on March 14, 2022, we filed a universal shelf registration statement (the “Shelf Registration Statement”), to provide for aggregate offerings of up to $350.0 million of common stock, preferred stock, debt securities, warrants or any combination thereof. As of December 31, 2023, $274.5 million remains available under this Shelf Registration Statement, including $119.8 million reserved for at-the market offerings discussed below.

At-the-Market Sales Agreement

In December 2022, we entered into a Sales Agreement with Stifel, Nicolaus & Company, Incorporated (“Stifel”) as the agent (the "Stifel ATM Facility"). Pursuant to the Stifel ATM Facility, we may offer and sell shares of common stock with an aggregate value of up to $125.0 million. We will pay Stifel a commission of up to 3.0% of the gross proceeds of any common stock sold through Stifel. We sold 139,462 shares of our common stock under the Stifel ATM Facility during the three months ended March 31, 2024 at a weighted-average price per share of $2.11 for aggregate net proceeds of $0.3 million, after deducting commissions. As of March 31, 2024, $119.8 million remained available to be sold under the Stifel ATM Facility.

Cash Requirements

As of March 31, 2024, there were no material changes in our short-term and long-term cash requirements from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Annual Report.

As of March 31, 2024, we had cash, cash equivalents and marketable securities of $107.5 million. We will need to raise additional capital in the future to fund our future operations. However, we cannot guarantee that we will be able to obtain sufficient additional funding or that if we do obtain additional funding, that such funding will be obtainable on terms satisfactory to us. In the event that we are unable to obtain sufficient additional funding, there can be no assurance that we will be able to continue as a going concern.

We expect that our existing cash, cash equivalents and marketable securities at March 31, 2024 will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2025. We have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we expect.

We expect our expenses to increase substantially if, and as, we:

• continue research and preclinical and clinical development of our product candidates, including in particular the expenses associated with our clinical trials;
• incur both internal and third party manufacturing costs to support our preclinical studies and clinical trials of our product candidates and, if approved, their commercialization;
• seek to identify and develop additional product candidates;
• make investments in our platform, including the continuing costs of developing and maintaining our internal manufacturing capabilities;
• seek regulatory and marketing approvals for our product candidates;
• establish a sales, marketing and distribution infrastructure to commercialize any approved product candidates;
• adapt our regulatory compliance efforts to incorporate requirements to applicable marketed products;
• acquire or in-license products, product candidates, technologies;
• maintain, expand, enforce, defend and protect our intellectual property;
• hire additional clinical, quality control, manufacturing and other scientific personnel;
• add operational, financial and management information systems and personnel;
• expand our office, laboratory and manufacturing facility; and
• experience any delays or encounter any issues with any of the above.

In addition, we expect to continue to incur additional costs associated with operating as a public company, including significant legal, audit, accounting, investor and public relations, regulatory, tax-related, director and officer insurance premiums, investor relations and other expenses. Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any product candidate for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for at least several years, if ever.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the public or private sale of our equity, government or private party grants, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. To the extent that we raise additional capital through the sale of our equity or convertible debt securities, including through the use of the Stifel ATM Facility, the ownership interest of our shareholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to obtain additional funding, we could be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or any commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations. If we raise funds through strategic collaborations or other similar arrangements with third parties, we may have to relinquish valuable rights to our platform technology, future revenue streams, research programs or product candidates or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. Our ability to raise additional funds may be adversely impacted by worsening global economic conditions and disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from geopolitical tensions and adverse macroeconomic conditions or otherwise. Because of the numerous risks and uncertainties associated with product development, we cannot predict the timing or amount of increased expenses, and there is no assurance that we will ever be profitable or generate positive cash flow from operating activities.

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements that, have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.

Cash Flows

The following table provides information regarding our cash flows for the periods presented (in thousands):

Operating Activities

Net cash used in operating activities was $30.5 million for the three months ended March 31, 2024, reflecting a net loss of $30.8 million and net cash used of $4.1 million for operating assets and liabilities, which were offset by non-cash charges of $4.5 million. The non-cash charges primarily consisted of stock-based compensation expense of $3.1 million, non-cash lease expense of $1.2 million and depreciation expense of $0.9 million, offset by $0.8 million of non-cash interest earned on marketable securities.

Net cash used in operating activities was $24.3 million for the three months ended March 31, 2023, reflecting a net loss of $28.4 million and net cash used of $0.7 million for operating assets and liabilities, which were offset by non-cash charges of $4.8 million. The non-cash charges primarily consisted of stock-based compensation expense of $4.1 million, non-cash lease expense of $1.1 million and depreciation expense of $0.8 million, offset by $1.2 million of non-cash interest earned on marketable securities.

The $6.2 million increase in net cash used in operating activities for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to an increase in research and development expenses as our clinical programs progressed and differences in the timing of payments for costs incurred during each respective period.

Investing Activities

Net cash provided by investing activities was $44.0 million for the three months ended March 31, 2024, which consisted of proceeds of $54.0 million from the maturity of marketable securities, offset by purchases of $9.9 million of marketable securities and $0.1 million of property and equipment. Net cash provided by investing activities was $6.5 million for the three months ended March 31, 2023, which consisted of proceeds of $30.0 million from the maturity of marketable securities, offset by purchases of $23.4 million of marketable securities and $0.1 million of property and equipment.

Financing Activities

Net cash provided by financing activities was $0.1 million for the three months ended March 31, 2024, which consisted of proceeds from the issuance of common stock under the Stifel ATM Facility of $0.3 million, offset by $0.2 million of taxes paid related to net share settlement of equity awards. Net cash provided by financing activities was $2.5 million for the three months ended March 31, 2023, which consisted of proceeds from the issuance of common stock under the Stifel ATM Facility of $3.6 million, offset by $0.4 million of taxes paid related to net share settlement of equity awards and $0.7 million of issuance costs related to the underwritten public offering under our Shelf Registration Statement and concurrent private placement that closed in December 2022.

Contractual Obligations and Other Commitments

Contractual obligations relate to future minimum lease payments for existing non-cancellable leases primarily relating to corporate office and laboratory real estate, with terms expiring through February 2030. During the three months ended March 31, 2024, there were no significant changes in contractual obligations and commitments from that described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Other Commitments” in our 2023 Annual Report.

Other commitments include license and collaboration agreements we have entered into with certain parties. Such arrangements require ongoing payments, including payments upon the achievement of certain development, regulatory and commercial milestones, receipt of sublicense income, as well as royalties on commercial sales. Payments under these arrangements are expensed as incurred.

We also have agreements with certain vendors for various services, including services related to clinical operations and support, which we are not contractually able to terminate for convenience and avoid any and all future obligations to the vendors. Under such agreements, we are contractually obligated to make certain payments to vendors to reimburse them for their unrecoverable outlays incurred prior to cancellation. The exact amounts of such obligations are dependent on the timing of termination and the exact terms of the relevant agreement and cannot be reasonably estimated. We do not include these payments in this summary as they are not fixed and estimable.

Recent Accounting Pronouncements

There are no new significant recent accounting pronouncements which may materially impact our financial statements.

We are a smaller reporting company as defined by Item 10 of Regulation S-K and are not required to provide the information otherwise required under this item.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of March 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of such date were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors disclosed in “Part I. Item 1A. Risk Factors” in our 2023 Annual Report.