There's nothing like a good clinical trial readout to get the blood pumping for a biotechnology industry that has been under a lot of pressure. The tech-laden Nasdaq Composite index may be down more than 30% this year, but that didn't stop money from pouring into Day One Biopharmaceuticals (DAWN 6.06%) recently.

A market reacting to positive clinical trial data for Day One's experimental brain cancer treatment, tovorafenib, pushed its stock price 126% higher on Monday, June 13. As is usually the case when a relatively unknown biotechnology stock shoots up, investors want to know if it can keep climbing.

Why Day One Biopharmaceuticals shot up

Day One's lead candidate, tovorafenib, is an oral, brain-penetrant, highly selective pan-rapidly accelerated fibrosarcoma, or pan-RAF, kinase inhibitor. Mutant pan-RAF kinases are thought to play a key role in tumor growth for glioma patients. By shutting down pan-RAF kinases, tovorafenib could be a new way to treat this difficult disease.

On Monday, June 12, the company announced positive results from the first 22 evaluable patients in an ongoing trial called Firefly 1. An outstanding 64% had smaller tumors, and only one patient worsened.

These results are especially encouraging signs that tovorafenib is truly effective, because all patients had already worsened after at least one previous treatment and a majority had failed three or more.

Day One's stock price started out fairly low because expectations for tovorafenib weren't very high at the outset of the Firefly 1 trial. This candidate is a cast-off from Takeda, a large international pharmaceutical company. Day One acquired rights to develop and market the kinase inhibitor formerly known as TAK-580 in 2019 for a little less than $10 million.

Why it could keep climbing

The Firefly 1 trial aimed tovorafenib at pediatric patients with low-grade glioma. This is the most common type of brain tumor diagnosed in children, and the condition currently lacks effective treatment options.

Day One thinks incoming results from the Firefly 1 trial will be able to support an application for accelerated approval. If the results we've already seen hold up at the next interim evaluation scheduled for the second half of 2022, the stock will rocket much higher. 

Pediatric glioma is rare, but the lack of effective treatments means the first one could quickly become a blockbuster drug with more than $1 billion in annual sales. Even after its big run-up, Day One's market cap is still a sprightly $926 million.  

Last year, Day One licensed a kinase inhibitor from Merck KGaA called pimasertib that takes a similar approach to limit unchecked tumor cell growth. A trial with both candidates is in the cards for 2023, and a combination of the two could be worth more than the sum of their parts. 

What to look out for

Cancer's unpredictable, and childhood-onset cancers are even more so. The initial results Day One showed are worth some excitement, but investors will want to tread very carefully. Firefly 1 is a single-arm study that is treating all enrolled patients with tovorafenib so we really don't know if the drug is responsible for the improvement.

The upcoming Firefly 2 trial will randomize patients to receive standard care or tovorafenib. I won't be the least bit surprised if the U.S. Food and Drug Administration insists on waiting for data from Firefly 2 instead of considering accelerated approval based on Firefly 1 results only. 

Seasoned biotech investors know that impressive response rate data in the early days of a cancer trial usually becomes much less impressive over time. This risky biotech stock could climb much higher, but investors need to understand that at the moment, it's still a long shot.