On Friday, March 6, oncology drug development company Bio-Path Holdings Inc. (NASDAQ: BPTH) reported fiscal year 2019 results. Since then, the company’s share price has dropped by 17%. Just over half that loss came on Monday, when markets collapsed over concerns about the spread of coronavirus and plunging oil prices.

Interestingly, on a day like Monday when share volume on major U.S. exchanges totaled more than 60 billion shares, Bio-Path stock traded just 101,000, short of its daily average of 108,000. The company can’t blame market panic for its woes, not even for one day.

Bio-Path is developing clinical and preclinical stage cancer drugs focused on RNAi nanoparticle drug development, using a novel technology that achieves systemic delivery for target-specific protein inhibition for any gene product that is overexpressed in disease.

Last November, Bio-Path announced the successful completion of the safety testing of prexigebersen in combination with decitabine in acute myeloid leukemia (AML) and myelodysplastic syndrome patients in Stage 2 of the Phase 2 clinical study.

Also in November, the company announced that the U.S. Food and Drug Administration (FDA) has reviewed and cleared the investigational new drug (IND) application for BP1002, the Bio-Path’s second drug candidate. An initial Phase 1 clinical trial will evaluate the ability of BP1002 to treat refractory/relapsed lymphoma and chronic lymphocytic leukemia patients.

When Things Really Went Wrong for Bio-Path

In January of last year, the company went through a 1-for-20 reverse stock split that, combined with a successful drug trial, pushed the split-adjusted price to nearly $40 a share by mid-March. Since then, however, the company has had to issue more shares to raise cash, never a popular act with existing investors.

If the successful Phase 2 clinical trial and the IND clearance were the good news from November, the bad news for the month was a registered direct offering of 808,080 shares of common stock and warrants to purchase up to 606,060 additional shares of its common stock, at a combined offering priced at $9.90 per share and associated warrant. The company realized gross proceeds of approximately $8.0 million from the offering.

The share price was cut by a quarter, dropping from $10.00 to around $7.60 in one day. The shares closed out 2019 at $7.99 and have trailed lower ever since.

Could Bio-Path Regain Its Footing?

At this point, the company may have used all the bullets it has to raise cash, unless and until the company’s drug pipeline produces some positive results. In its annual report, Bio-Path said the cash it raised from the November offering is enough to fund liquidity and capital spending requirements for at least the next 12 months. The company also noted that it could continue to lose money indefinitely and that there is no reason to believe it can raise more.

Bio-Path also noted that it has posted net losses of $8.6 million for each of the past two fiscal years. As of December 31, 2019, the company had an accumulated deficit of $56.3 million and had $20.4 million in cash and cash equivalents. The good news is that Bio-Path has no debt.

Like all developmental drug companies, the company is betting on the success of its drug candidates. Drugs that are in trials often fail, so Bio-Path’s investors need to gamble that one or more of its treatments will make it to market.

Bio-Path Will Need to Raise More Cash

Investors also need to be aware that the company’s options for raising additional cash are limited. They can open a credit facility, take an outside investment, sweet-talk an investment bank into a financing arrangement the company can afford, or issue more stock.

None of those choices will be available, however, unless the company produces positive trial results. Those are at least months away.

The company’s shares are also thinly traded. On average, the stock trades 108,000 shares a day. A new investor in Bio-Path shares had better plan on holding on to the stock for a while because there are unlikely to be many buyers clamoring for shares.

As of the end of February, Bio-Path reported 3.69 million shares of common stock issued and outstanding among just 218 shareholders. The company also noted that the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $37.46 million as of June 28, 2019. At its recent closing price of $4.56, those shares are worth $16.83 million.

Bio-Path reported nine full-time employees at the end of 2019. Co-founder Peter Nielsen is also the company’s board chair, chief executive, chief financial officer, president and treasurer. For wearing all those hats, he was paid $734,000 in 2019, and he is the only named executive whose compensation must be reported to the U.S. Securities and Exchange Commission.

Nielsen owns less than 1.2% of shares outstanding, and the company’s board as a group owns approximately 1.6% of those shares. There is no listed owner of 5% or more of the company’s stock.

One might argue that the right time for Bio-Path to have issued more stock was right after the March announcement of its successful drug trial. The problem was that the company had just completed its reverse split, and issuing more shares at the time would have been risky.

The delay in getting its AML drug approved coupled with little enthusiasm currently for risky investments means that Bio-Path almost certainly has to report a successful trial this year or see its stock price tumble even further.

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