We came across a bullish thesis on Day One Biopharmaceuticals, Inc. (DAWN) on Twitter by Pharmdca. In this article, we will summarize the bulls’ thesis on DAWN. Day One Biopharmaceuticals, Inc. (DAWN)'s share was trading at $8.60 as of March 4^th.

DAWN is an undervalued commercial-stage oncology company with a long-term target in the mid-$30s, driven by its total addressable market (TAM) and strong pipeline. Its lead drug, OJEMDA, has quickly gained traction, generating $57 million in revenue within eight months of launch. As the only systemic therapy for pediatric low-grade glioma (pLGG) that offers once-weekly oral or suspension dosing, OJEMDA is uniquely positioned in the market. pLGG is the most common brain tumor in children, with BRAF gene alterations found in approximately 75% of cases. OJEMDA is the only approved treatment for pLGG patients with BRAF fusions, and it is currently in Phase 3 trials as a frontline therapy versus chemotherapy.

Competition in the space includes Novartis’ combination of dabrafenib and trametinib (Tafinlar-Mekinist), which received approval for pLGG but is limited to BRAF V600 mutations, covering only 20% of cases. In contrast, OJEMDA treats both BRAF fusions and mutations, making it the superior option. Data from the FIREFLY-1 trial, which led to its accelerated approval, showed that nearly 70% of patients experienced tumor shrinkage or disappearance. Given that BRAF fusions account for the majority of BRAF alterations in pLGG, OJEMDA’s broader applicability strengthens its competitive edge. Additionally, it offers a more convenient once-weekly dosing schedule compared to Novartis’ twice-daily regimen, while also avoiding potential tumor growth issues associated with type 1 BRAF inhibitors like Tafinlar.

With an estimated TAM of $750 million to $1 billion in peak sales for OJEMDA and a strong cash position of $530 million against a $1.2 billion market cap, DAWN presents a compelling opportunity. Upcoming milestones, including OJEMDA’s earnings trajectory, first-in-human data for DAY301, and Phase 3 FIREFLY-2 results, could serve as catalysts for a major rerating of the stock. Despite weak sentiment in the biotech sector, DAWN remains significantly undervalued, offering an asymmetric risk/reward opportunity.

Day One Biopharmaceuticals, Inc. (DAWN) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 36 hedge fund portfolios held DAWN at the end of the fourth quarter which was 34 in the previous quarter. While we acknowledge the risk and potential of DAWN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DAWN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.