Day One Biopharmaceuticals (DAWN) enjoyed a strong third quarter in 2024, significantly beating top-and-bottom-line expectations driven by robust demand for cancer therapy OJEMDA. The company raised a noteworthy $20.1 million and concluded the quarter with $558.4 million in funds and investments. It also entered a lucrative licensing agreement with Ipsen (IPN) and looks forward to additional growth via new trials and expanding market reach. Yet, the company disclosed that most of the business comes from three customers, with one representing over 66% of sales, a level of extreme concentration risk.
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Furthermore, the announcement of the retirement of co-founder and Head of Research and development at the end of 2024 was surprising. Day One shows promising upside potential, though investors might want to wait until the dust settles and the company shows no further signs of negative news that could depress the stock.
Day One Boasts Solid Growth, Promising Partnerships, and a Cash Stockpile
Day One Biopharmaceuticals is a company focused on addressing the significant gap in therapeutic development in pediatric cancer. The company was inspired by the initial conversations that physicians have with patients and families upon a cancer diagnosis, leading them to aspire to transform the approach to cancer drug development. Its goal is to improve the lives of all cancer patients, irrespective of age, right from the start – “Day One.”
The company has demonstrated continued patient demand for its pediatric low-grade glioma therapy – OJEMDA. It has shown strong growth, with the number of prescriptions rising to 619, marking a 159% increase over the second quarter.
Day One plans to advance its programs and pipeline, including DAY301, a potential first-in-class ADC targeting PTK7, which is expected to enter clinical trials in the coming months. Day One aims to administer the first dose to a patient in Phase 1a, part of the clinical trial of DAY301, by the end of 2024 or early 2025.
Additionally, Day One and Ipsen have entered an exclusive license agreement to commercialize tovorafenib outside the U.S., with Day One receiving approximately $111 million upfront in cash and equity. Furthermore, Day One entered into an agreement for an oversubscribed private placement of its securities, grossing roughly $175 million in July 2024.
Surging Sales and License Revenue
The company reported results for the third quarter of 2024, which saw marked financial progress. Total revenue of $93.7 million handily beat analysts’ expectations. OJEMDA’s net product revenues reached $20.1 million, marking the first full quarter of its U.S. launch. In addition, the company experienced an increase in the license revenue from sales of overseas commercial rights for tovorafenib, netting $73.7 million.
On the expenditure side, research and development costs slightly increased to $33.6 million. This increase was mainly due to clinical trials of tovorafenib and increased employee compensation costs. Similarly, administrative expenses rose to $29.0 million from $18.3 million in the previous year due to commercial launch activities, employee compensation, and professional service expenses related to OJEMDA’s launch.
Net income for the quarter was reported at $37.0 million, a significant increase from a net loss of $46.2 million noted in the corresponding period in 2023. Earnings per share (EPS) were $0.38, beating consensus projections of -$0.32
As of the quarter’s end, the company reported cash, cash equivalents, and short-term investments of $558.4 million.
Negative Momentum but Bullish Forecast
The stock has bounced around for much of the past year, with the recent downturn pushing it down 10% for the year. It trades near the bottom of its 52-week price range of $11.94 – $18.07 and shows ongoing negative momentum as it trades below all major moving averages.
Analysts following the company have been bullish on DAWN stock. For example, J.P. Morgan (JPM) analyst Anupam Rama reiterated a Buy rating on the stock, noting the impressive performance of Ojemda, indicating strong initial adoption among prescribers, with the long-term potential appearing robust.
Day One Biopharmaceuticals is rated a Strong Buy overall, based on the recent recommendations of nine analysts. The average price target for DAWN stock is $35.57, representing a potential upside of 181.85% from current levels.
Final Deliberations on Dawn
Day One had an impressive Q3 2024, with strong demand for its cancer therapy, OJEMDA, surpassing expectations. Moreover, a new licensing deal with Ipsen promises more avenues for growth. However, investors should be aware of some concentration risk and the possibility that the retirement of a co-founder might lead to some instability. Despite some negative momentum in the stock price, the company is bullish on its future with the potential launch of new clinical trials and optimistic analyst ratings. Day One shows solid potential, but investors might want to remain cautious until any lingering uncertainties clear.
