We Think Day One Biopharmaceuticals (NASDAQ:DAWN) Can Easily Afford To Drive Business Growth

There's no doubt that money can be made by owning shares of unprofitable businesses. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

So should Day One Biopharmaceuticals (NASDAQ:DAWN) shareholders be worried about its cash burn? For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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When Might Day One Biopharmaceuticals Run Out Of Money?

A cash runway is defined as the length of time it would take a company to run out of money if it kept spending at its current rate of cash burn. When Day One Biopharmaceuticals last reported its September 2025 balance sheet in November 2025, it had zero debt and cash worth US$452m. Looking at the last year, the company burnt through US$125m. So it had a cash runway of about 3.6 years from September 2025. Importantly, though, analysts think that Day One Biopharmaceuticals will reach cashflow breakeven before then. In that case, it may never reach the end of its cash runway. You can see how its cash balance has changed over time in the image below.

Check out our latest analysis for Day One Biopharmaceuticals

How Well Is Day One Biopharmaceuticals Growing?

It was fairly positive to see that Day One Biopharmaceuticals reduced its cash burn by 23% during the last year. On top of that, operating revenue was up 31%, making for a heartening combination We think it is growing rather well, upon reflection. Clearly, however, the crucial factor is whether the company will grow its business going forward. For that reason, it makes a lot of sense to take a look at our analyst forecasts for the company.

Can Day One Biopharmaceuticals Raise More Cash Easily?

There's no doubt Day One Biopharmaceuticals seems to be in a fairly good position, when it comes to managing its cash burn, but even if it's only hypothetical, it's always worth asking how easily it could raise more money to fund growth. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.

Day One Biopharmaceuticals has a market capitalisation of US$899m and burnt through US$125m last year, which is 14% of the company's market value. As a result, we'd venture that the company could raise more cash for growth without much trouble, albeit at the cost of some dilution.

So, Should We Worry About Day One Biopharmaceuticals' Cash Burn?

It may already be apparent to you that we're relatively comfortable with the way Day One Biopharmaceuticals is burning through its cash. For example, we think its cash runway suggests that the company is on a good path. Its cash burn reduction wasn't quite as good, but was still rather encouraging! It's clearly very positive to see that analysts are forecasting the company will break even fairly soon. After considering a range of factors in this article, we're pretty relaxed about its cash burn, since the company seems to be in a good position to continue to fund its growth. An in-depth examination of risks revealed 1 warning sign for Day One Biopharmaceuticals that readers should think about before committing capital to this stock.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.