Markets have reacted positively to news that Day One Biopharmaceuticals (NASDAQ:DAWN) has received accelerated FDA approval for a novel pediatric cancer treatment. The stock is up over nearly 30% in the past few days, and forecasts for growing revenue suggest more room to run, making it a biopharma stock worthy of consideration.
According to the American Brain Tumor Association, approximately 90,000 people are diagnosed with a brain tumor annually, and roughly a third are children. Pediatric low-grade gliomas (pLGGs) are the most common brain tumors in children and represent 30-35% of all pediatric central nervous system (CNS) tumors. Day One’s treatment is the first of its kind approved for patients with the most common form of pLGGs (those with BRAF-altered genes), and there is high anticipation for a successful market launch.
Day One Biopharmaceuticals’ Pipeline
Day One Biopharmaceuticals is a commercial-stage company that focuses on addressing the lack of therapeutic development in pediatric cancer. Its business model is based on solving the urgent needs in pediatric oncology and then expanding those treatments to a broader swath of patient groups who could benefit from them.
The recent breakthrough in Day One’s pipeline is Tovorafenib (branded as OJEMDA). The FDA has granted this drug Breakthrough Therapy and Rare Pediatric Disease designations, and it is currently under evaluation in two pivotal clinical trials for pLGG. In addition to its role as a potential treatment for primary brain tumors or brain metastases, it has received orphan drug designation from the FDA and the European Commission for the treatment of malignant glioma.
The drug has been approved for the treatment of patients aged six months and older with relapsed or refractory pLGG harboring a BRAF fusion or rearrangement or BRAF V600 mutation (which represents up to 75% of pediatric brain tumor patients).
This approval has been accelerated due to promising response rates and duration of response in clinical trials, awarding Day One with a rare pediatric disease priority review voucher. Until now, there have been no approved treatments for this group. The company anticipates a total addressable market of 2,000-3,000 people annually.
Day One has several other candidates in the pipeline. Pimasertib, which targets RAF alteration in melanoma and other solid tumors, is in Phase 1/2, and a pre-clinical VK1 novel treatment targets the regulation of cell division and DNA damage repair.
Day One’s Recent Financials & Outlook
Tovorafenib is the company’s first treatment successfully brought to market. Like many startup biopharma companies, Day One has been focused on burning cash to support R&D efforts before this. For the fiscal year ending December 31, 2023, the company’s net loss was $188.9 million. This was higher than the net loss of $142.2 million in the previous year.
Regarding the company’s financial position, as of December 31, 2023, it held $366.3 million in cash, cash equivalents, and short-term investments. Based on the firm’s current operating plan, management is confident these resources can sustain operations through 2026.
Is DAWN Stock a Buy, According to Analysts?
Analysts following the company have mostly been bullish on DAWN stock. For instance, Needham analyst Ami Fadia recently raised the price target from $30 to $33 and reiterated a Buy rating on the shares, citing the FDA’s approval as a growth catalyst.
Overall, Day One Biopharmaceuticals is rated a Moderate Buy based on the recommendations and 12-month price targets from 11 Wall Street analysts in the past three months. The average price target for DAWN stock is $36.56, which represents a 107% upside from current levels.
The stock has previously been highly volatile. However, with recent news of treatment approval, it has been trending upward. It now trades at the upper end of its 52-week price range of $9.67-$17.85 and continues to show positive price momentum, trading above the 20-day (14.89) and 50-day (14.90) moving averages.
The Bottom Line on Day One Biopharmaceuticals
Day One has brought a first-of-its-kind treatment for pediatric brain tumors to market, and hope abounds for its success. Investor sentiment is high, driving the stock price up, though there is work to do. The company is in the process of launching distribution efforts, which will take some time. Investors should be prepared for a volatile ride on this speculative investment in the interim, but its long-term upside potential looks promising.
