Inside the bible are the following words:
"With this dagger, sever the link and the demon horde will fall. Within your faith lies the answer."
Taking the dagger into his possession, Mr. Hannay follows Xavier Rehayem into the room at the end of the hallway. He then ventures into the Spirit Realm and finds his way back to the Earth Realm. He finds out that the Hand of Exmortis is unaffected by bullets, and equips the dagger. Sneaking up behind the Hand, Mr. Hannay thrusts the dagger into his back, apparently destroying the Hand and sending the Cult of Exmortis back to whence they came.
This same blade was used once again in the third game, it was placed within a stone atop vlaew's base. it is currently unknown as to whether the blade had an important part to play besides maybe unlocking a set of double doors into the base.