Day One Biopharmaceuticals: Bear Case Priced In, Bull Case Unexplored

Day One Biopharmaceuticals' stock has given up all gains made after Phase 2 data for tovorafenib in pediatric low-grade glioma. Despite accelerated approval in May 2024, tovorafenib's performance has been disappointing. The bear case has been priced in, but the bull case is not yet reflected in the stock's price.

Title: Day One Biopharmaceuticals Stock: Bear Case Priced In, Bull Case Awaits

Day One Biopharmaceuticals' stock (NASDAQ: DAWN) has experienced a significant decline since the Phase 2 data for tovorafenib in pediatric low-grade glioma (pLGG) were released. Despite receiving accelerated approval in May 2024 and being marketed as OJEMDA, the stock has fallen by 52% since then. The company's stock has also declined by 16% following its second-quarter earnings report, raising questions about the drug's market potential and the company's financial health.

Tovorafenib, a second-generation BRAF inhibitor, is one of the few available treatments for pLGG. However, its niche market and the potential for safety concerns have led to a bearish outlook on the stock. The company's enterprise value of $227 million currently pales in comparison to the drug's potential in pLGG, particularly if the FIREFLY-2 clinical trial, which is testing tovorafenib versus chemotherapy in first-line treatment, proves successful.

The FIREFLY-2 trial is designed to randomize approximately 400 newly diagnosed, RAF-altered pLGG patients 1:1 versus investigator-choice chemotherapy. The primary endpoint is overall response rate (ORR), and the trial is powered to detect a 15-point delta, assuming a 30% ORR for chemotherapy, which is well below tovorafenib's 67% ORR in the FIREFLY-1 trial. If FIREFLY-2 succeeds, it could position OJEMDA as a blockbuster drug, assuming first-line usage in BRAF fusion patients.

Despite the challenges, Day One has made progress in securing new patients and increasing utilization in earlier lines. The company's Q2 revenue of $33.6 million, a 310% year-over-year increase from the second quarter of 2024, indicates that the drug is gaining traction in the market. However, the sequential growth of only 10% in the second quarter of 2025 raises concerns about the sustainability of this growth.

The company's financial health remains strong, with $453.1 million in cash, cash equivalents, and short-term investments as of the end of the second quarter. The company expects to present 3-year follow-up data from the FIREFLY-1 trial in the fourth quarter of 2025, which could provide further validation for tovorafenib's efficacy.

In conclusion, while the bear case for Day One Biopharmaceuticals' stock has been priced in, the bull case remains unreflected in the stock's current valuation. The company's pipeline and the potential success of the FIREFLY-2 trial could provide significant upside for investors. However, the risks associated with the drug's niche market, safety concerns, and the company's reliance on a single asset should be carefully considered.

References:
[1] https://seekingalpha.com/article/4810747-day-one-biopharmaceuticals-stock-q2-bear-case-priced-but-bull-case-not-upgrade-buy
[2] https://ir.dayonebio.com/news-releases/news-release-details/day-one-reports-second-quarter-2025-financial-results-and