Bio-Path Holdings Inc (NASDAQ:BPTH) Is A Biotech Recovery Play

Bio-Path Holdings Inc (NASDAQ:BPTH) took a real hit at the end of last week, on the back of the company announcing a $4 million registered direct offering.The offering will involve the sale and issuance to healthcare-focused institutional investors of a little over 13.3 million shares of common stock and warrants to purchase up to around 6.6 million shares of common stock, with gross proceeds of the above noted $4.0 million. BPTH Daily ChartAccording to the release outlining the offering, the offering price per share plus on half warrant will be $0.30 (for reference, the company traded at $0.45 at the end of October), while the warrants will be exercisable immediately, have a term of five years and have an exercise price of $0.45 per share of common stock.These sorts of development are generally negative in near term implications from a market capitalization perspective, with the negativity rooted in the dilution associated with equity issue.They can also be an opportunity, however. If a company takes a hit on the raise announcement it means that traders and investors can pick up shares at a discount. If the capital that's being raised is then put to use toward a value driving catalyst, there's a strong chance of a recovery towards preannouncement pricing and – oftentimes – run in excess of said price.The trick is to figure out which raises have the potential to follow the above-outlined pattern.So does Bio-Path fall into this category?We think so.For those new to this company, Bio-Path is a development stage biotechnology stock that's trying to bring to market a pretty diverse range of early-stage assets, most of which target different types of cancer. The company's lead asset is called prexigebersen, or BP1001, and it's on this asset that we place the major portion of its valuation right now. It's also on this program that we are relying for a near-term upside catalyst – one that can get the stock moving north as we head into the close of the year.The company stated the following in the Use of Proceeds section of the prospectus associated with the raise:

"We currently intend to use the net proceeds from this offering for working capital and general corporate purposes."

Obviously, that doesn’t serve up much in the way of clarity, but we can extrapolate from Bio-Path's development pathway that the company is going to fund the continued advance of a phase II trial of the above-mentioned BP1001 in an acute myeloid leukemia (AML). This trial is a 54 patient study that isn’t going to complete until the end of next year but – and here's what we're excited about – is set to report an interim batch of data during the second half of this year. That means we've got somewhere in the region of seven weeks during which data from this company's lead study is going to hit press. If the numbers are strong, patients will have the option to switch over to a registration trial, which will speed up the pathway to approval of this drug in this indication in the US.The trial is comparing the drug in combination with low-dose cytarabine (LDAC), a chemotherapy drug, with LDAC alone, meaning the primary endpoint is rooted in the difference in efficacy between the two treatments.Specifically, the primary is looking at efficacy as measured against complete remission, complete remission with incomplete hematologic recovery and complete remission with incomplete platelet recovery than LDAC alone (by historical comparison).If the numbers point towards a benefit to adding BP1001 to a round of traditional standard of care chemotherapy in this population, there's some real upside strength on the cards for Bio-Path and the equity raise-driven decline will be very much in the rearview mirror.We will be updating our subscribers as soon as we know more. For the latest updates on BPTH, sign up below!Image courtesy of University of Liverpool Faculty of Health & Life Sciences via FlickrDisclosure: We have no position in BPTH and have not been compensated for this article.