Day One Biopharmaceuticals pany(DAWN) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's unaudited interim condensed consolidated financial statements and management's discussion and analysis for the period Item 1. Interim Condensed Consolidated Financial Statements (Unaudited) This section presents the company's unaudited condensed consolidated financial statements for the quarterly period ended June 30, 2022, including balance sheets, statements of operations, comprehensive loss, changes in stockholders' equity, and cash flows, along with detailed notes Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2022, shows a significant increase in total assets, primarily driven by a rise in cash and cash equivalents from financing activities, with total stockholders' equity also increasing Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $388,877 | $284,309 | | Total current assets | $402,503 | $289,368 | | Total assets | $404,047 | $289,821 | | Liabilities & Stockholders' Equity | | | | Total liabilities | $13,416 | $8,673 | | Total stockholders' equity | $390,631 | $281,148 | | Total liabilities and stockholders' equity | $404,047 | $289,821 | Condensed Consolidated Statements of Operations The company reported a significantly higher net loss for the three and six months ended June 30, 2022, compared to 2021, primarily due to substantial growth in R&D and G&A expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $22,560 | $9,914 | $37,563 | $22,547 | | General and administrative | $14,159 | $5,525 | $26,904 | $8,990 | | Loss from operations | ($36,719) | ($15,439) | ($64,467) | ($31,537) | | Net loss | ($36,530) | ($15,473) | ($64,277) | ($31,575) | | Net loss per share | ($0.60) | ($5.04) | ($1.08) | ($10.81) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2022, the company experienced a net cash outflow from operating activities, offset by significant cash inflow from financing activities, resulting in a substantial net increase in cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($51,350) | ($23,149) | | Net cash used in investing activities | ($6,012) | ($8,000) | | Net cash provided by financing activities | $161,930 | $297,417 | | Net increase in cash and cash equivalents | $104,568 | $266,268 | Notes to Condensed Consolidated Financial Statements These notes provide crucial details on the company's formation, IPO, significant accounting policies, and financial instruments, including license agreements, equity-based compensation, and financing activities - In June 2022, the company completed a follow-on offering, selling 11,500,000 shares of common stock for net proceeds of approximately $161.6 million[86] - A milestone payment of $2.5 million was made to Merck KGaA in the second quarter of 2022 related to the first dosing of a patient in a clinical trial for a product containing pimasertib[66] - In July 2022, the company entered into an agreement to develop a companion diagnostic for tovorafenib (DAY101), which includes potential milestone payments of up to $15.0 million[110] - As of June 30, 2022, there was $70.0 million of unrecognized compensation cost related to unvested equity awards, expected to be recognized over a weighted-average period of approximately 2.9 years[104] Management's Discussion and Analysis of Financial Condition and Results of Operations Management provides an overview of the company's business, focusing on its clinical-stage pipeline led by tovorafenib (DAY101), analyzing the significant increase in operating expenses and net loss, and detailing its strong liquidity position Overview Day One is a clinical-stage biopharmaceutical company focused on developing targeted therapies, with its lead candidate, tovorafenib (DAY101), in a pivotal Phase 2 trial for pediatric low-grade glioma (pLGG), with promising initial data - The company's lead product candidate, tovorafenib (DAY101), is an oral, brain-penetrant, highly-selective pan-RAF kinase inhibitor[112] - The pivotal Phase 2 trial (FIREFLY-1) for pediatric patients with relapsed or progressive low-grade glioma (pLGG) completed enrollment in its registrational arm in May 2022[112] - Initial data from FIREFLY-1 in June 2022 demonstrated an overall response rate (ORR) of 64% and a clinical benefit rate (CBR) of 91% in the first 22 evaluable patients[113] - The company anticipates reporting topline data from the FIREFLY-1 trial in Q1 2023 and submitting an NDA to the FDA in the first half of 2023[113] Results of Operations The company's operating expenses and net loss increased significantly in the three and six months ended June 30, 2022, primarily due to higher R&D costs from clinical trial and manufacturing activities, and increased G&A expenses from headcount growth and public company operations Comparison of Operating Expenses (in thousands) | Expense Category | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $22,560 | $9,914 | $12,646 | 127.6% | | General and administrative | $14,159 | $5,525 | $8,634 | 156.3% | | Total operating expenses | $36,719 | $15,439 | $21,280 | 137.8% | - The increase in Q2 2022 R&D expenses was driven by a $7.9 million rise in third-party clinical trial and manufacturing costs and a $5.3 million increase in personnel-related expenses[140] - The increase in Q2 2022 G&A expenses was primarily due to $4.0 million in employee compensation from headcount growth and $4.4 million in legal, insurance, and professional services[141] Liquidity and Capital Resources The company significantly strengthened its financial position through a June 2022 follow-on offering, raising net proceeds of $161.6 million, and expects its current cash to fund operations into 2025 - As of June 30, 2022, the company had $388.9 million in cash and cash equivalents and an accumulated deficit of $191.8 million[149] - Management believes existing cash will be sufficient to fund operating expenses and capital expenditure requirements into 2025[149][160] - In June 2022, the company completed a follow-on offering with net proceeds of approximately $161.6 million and also established a $150.0 million at-the-market (ATM) offering program[147] Quantitative and Qualitative Disclosures About Market Risk The company states that as a smaller reporting company, it is not required to provide the information requested under this item - As a smaller reporting company, Day One is not required to provide quantitative and qualitative disclosures about market risk[169] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[170] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[171] PART II. OTHER INFORMATION This section covers other important disclosures including legal proceedings, risk factors, equity sales, and exhibits Legal Proceedings The company reports that it is not currently a party to any legal proceedings that, in management's opinion, would have a material adverse effect on its business - The company is not presently a party to any legal proceedings that would have a material adverse effect on its business[174] Risk Factors This section provides a comprehensive overview of the risks facing the company, including substantial dependence on its lead product candidate, limited operating history, need for additional capital, clinical and regulatory uncertainties, reliance on third parties, and intense competition - Financial Risks: The company has a limited operating history, has incurred significant net losses since inception, and expects to incur continued losses, requiring substantial additional capital to finance operations[177][181][192] - Clinical and Commercial Risks: The company is substantially dependent on the success of its lead product candidate, tovorafenib (DAY101), with clinical trials being expensive, time-consuming, and having uncertain outcomes, potentially impacted by the COVID-19 pandemic[183][199][227] - Third-Party Reliance: The company relies on third parties for complex manufacturing, which could be subject to delays or disruptions, and for conducting clinical trials[315][319] - Intellectual Property Risks: The company's success depends on its ability to obtain and maintain patent protection for its products and technology, which is uncertain and may be challenged by competitors[364] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities for the period and confirms no material change in the planned use of proceeds from its June 2021 Initial Public Offering (IPO) - There were no unregistered sales of equity securities during the period[463] - The company received net proceeds of approximately $167.0 million from its IPO on June 1, 2021[465] - There has been no material change in the planned use of proceeds from the IPO as described in the prospectus[466] Defaults Upon Senior Securities The company reports that there were no defaults upon senior securities during the period - None[467] Mine Safety Disclosures This item is not applicable to the company - Not applicable[467] Other Information The company reports no other information for this item - None[467] Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including an office lease agreement and certifications from the Principal Executive Officer and Principal Financial Officer - The report includes an exhibit for an office lease dated April 1, 2022[468] - Certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed as exhibits[468]