BIO-PATH HOLDINGS INC

When you read this Item of this Quarterly Report on Form 10-Q, it is important that you also read the unaudited financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and notes thereto included in our Annual Report on Form 10-K as of the fiscal year ended December 31, 2019. This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements due to the impact, risks and uncertainties related to COVID-19 and actions taken by governmental authorities or others in connection therewith. To date, COVID-19’s impact on operations has been limited to the inability to travel to clinical trial sites and clinical trial sites not allowing nonessential personnel on site for the purpose of monitoring activity. We anticipate COVID-19 may have an effect on patient recruiting in the near term as social distancing mandates are in effect. We believe these operational issues can be managed through remote monitoring capabilities currently being developed. Our actual results could also differ materially from those anticipated in these forward-looking statements for many other reasons, including the matters discussed in “Item 1A. Risk Factors” to Part I of our Annual Report on Form 10-K as of the fiscal year ended December 31, 2019, the matters discussed in “Item 1A. Risk Factors” to Part II of this Quarterly Report on Form 10-Q, and other risks and uncertainties discussed in filings made with the SEC. See “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q for additional discussion regarding risks associated with forward-looking statements.

Using DNAbilize® as a platform for drug development and manufacturing, we currently have four drug candidates in development to treat at least five different cancer disease indications. Our lead drug candidate, prexigebersen (pronounced prex” i je ber’ sen), initially started the efficacy portion of a Phase 2 clinical trial for untreated or de novo acute myeloid leukemia (“AML”) patients in combination with low-dose cytarabine (“LDAC”). Subsequently, a second cohort of untreated AML patients was added to the clinical trial for treatment with prexigebersen in combination with decitabine. On March 6, 2019, we announced intended Stage 2 amendments to this Phase 2 clinical trial to (i) add high risk myelodysplastic syndrome (“MDS”) patients to the untreated AML cohort being treated with prexigebersen in combination with decitabine, (ii) close the prexigebersen in combination with LDAC treatment cohort, (iii) add a cohort of relapsed/refractory AML and high risk MDS patients for treatment with prexigebersen and decitabine and (iv) following successful completion of a safety segment treating AML and MDS patients with prexigebersen in combination with decitabine, add venetoclax to the treatment combination treating all patient cohorts with prexigebersen in combination with decitabine and venetoclax. On November 26, 2019, we announced successful completion of safety testing of the treatment combination of prexigebersen and decitabine in AML and MDS patients in Stage 2 of this Phase 2 clinical trial. In addition, preclinical efficacy studies for the triple combination treatment of prexigebersen, decitabine and venetoclax in AML have been successfully completed. Based on the successful completion of these studies, we submitted the amendment for the Stage 2 Phase 2 clinical trial to add the triple combination treatment comprised of prexigebersen, decitabine and venetoclax to the U.S. Food and Drug Administration (“FDA”). The FDA requested that the treatment of MDS patients with the triple combination of prexigebersen, decitabine and venetoclax be conducted in a separate clinical trial. As a result, the amendment was modified and resubmitted to the FDA for approval. The Company is awaiting approval of the modified amendment, which is expected by summer 2020. Prexigebersen has also been planned for a safety portion of a Phase 2a clinical trial for chronic myeloid leukemia (“CML”) accelerated and blast crisis patients in combination with dasatinib. However, due to declining patient population, the Company will not pursue this program any further. Finally, a modified product named prexigebersen-A, Bio-Path’s fourth drug candidate, has shown to enhance chemotherapy efficacy in preclinical solid tumor models. Prexigebersen-A incorporates the same drug substance as prexigebersen but has a slightly modified formulation designed to enhance nanoparticle properties. In late 2019, we filed an Investigational New Drug (“IND”) application to initiate a Phase 1 clinical trial of prexigebersen-A in patients with solid tumors, including ovarian and uterine, pancreatic and breast cancer. This trial is expected to commence after the IND has been cleared by the FDA, which we currently anticipate being in 2020.

Operating Activities. Net cash used in operating activities for the three months ended March 31, 2020 was $2.5 million. Excluding non-cash stock-based compensation expense of $0.2 million, net cash used in operating activities consisted primarily of the net loss for the period of $3.3 million, an increase in current liabilities of $0.3 million and a decrease in other current assets of $0.3 million. Net cash used in operating activities for the three months ended March 31, 2019 was $2.0 million. Excluding non-cash stock-based compensation expense of $0.2 million and depreciation expense of $0.1 million, net cash used in operating activities consisted primarily of the net loss for the period of $1.5 million, an increase in prepaid expenses and other current assets of $0.7 million and a decrease in current liabilities of $0.1 million.

For instance, our clinical trials may be affected by the pandemic. Site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data analysis may be paused or delayed due to changes in hospital or university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the pandemic. If COVID-19 continues to spread, some participants and clinical investigators may not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, and we may be unable to conduct our clinical trials. Additionally, infections and deaths related to the pandemic may disrupt the United States’ healthcare and healthcare regulatory systems. Such disruptions could divert healthcare resources away from, or materially delay FDA review and/or approval of, our clinical trials. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of our product candidates.

To date, COVID-19’s impact on operations has been limited to the inability to travel to clinical trial sites and clinical trial sites not allowing nonessential personnel on site for the purpose of monitoring activity. We believe these operational issues can be managed through remote monitoring capabilities currently being developed. We anticipate COVID-19 may have an effect on patient recruiting in the near term as social distancing mandates are in effect.

The global outbreak of COVID-19 continues to rapidly evolve. The extent to which COVID-19 may impact our business, including our clinical trials, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. We will continue to monitor the situation closely.

On May 12, 2020, our board of directors approved an amendment (the “Amendment”) to the Bio-Path Holdings, Inc. 2017 Stock Incentive Plan (as amended, the “Plan”) to increase the maximum number of shares of the Company’s common stock with respect to which awards may be granted to a participant during any calendar year under the Plan to 165,000. The foregoing description of the Amendment is qualified in its entirety by reference to the full text of the Amendment, a copy of which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q and is incorporated by reference herein.