Why did the Mesoblast share price just dive 12%?

A man sits uncomfortably at his laptop computer in an outdoor location at a table with trees in the background as he clutches the back of his neck with a wincing look on his face.A man sits uncomfortably at his laptop computer in an outdoor location at a table with trees in the background as he clutches the back of his neck with a wincing look on his face.

The Mesoblast Ltd (ASX: MSB) share price has taken a dive after the medicines developer announced the completion of a global private placement.

What is probably irking investors is that the placement offer price was 85 cents per share.

This is 14% below where Mesoblast shares were trading last Thursday when the company requested a trading halt.

Mesoblast tapped existing major shareholders in the United States, the United Kingdom, and Australia to raise approximately US$40 million.

Mesoblast share price falls in line with placement discount

The Mesoblast share price is currently down 11.6% at 87.5 cents.

Mesoblast told the market about the capital raise when it requested the trading halt last Thursday.

The plan was for the stock to resume trading either when a further announcement was made, or at the market open on Monday.

The company requested voluntary suspension before trading commenced on Monday, saying it needed more time to complete the placement.

Mesoblast will use the proceeds for three purposes.

Firstly, to launch and commercialise Mesoblast’s lead product, remestemcel-L.

Remestemcel-L is a treatment for children with steroid-refractory acute graft versus host disease (SR-aGVHD).

The US Food & Drug Administration (FDA) accepted Mesoblast’s resubmission for approval on 8 March.

This was a big step forward towards approval.

Excited investors bid the Mesoblast share price up 23% on the day of the announcement.

The FDA has set a prescription drug user fee act (PDUFA) goal date of 2 August.

The FDA has previously given remestemcel-L fast-track designation, which speeds up the development and review process for new therapies that treat serious conditions and unmet medical needs.

The drug also has priority review designation, which is given to drugs that are likely to be safer and more effective than current treatments.

SR-aGVHD has a mortality rate of up to 90%. There are currently no FDA-approved treatments in the US for children under 12 with SR-aGVHD.

Secondly, the monies will help fund the ongoing manufacturing of remestemcel-L at the Lonza Biosciences facility in Singapore. The FDA has scheduled a pre-licensure inspection there soon.

Thirdly, Mesoblast will use some of the proceeds to begin enrolling patients in the Phase 3 clinical trial of rexlemestrocel-L.

This treatment is for chronic lower back pain associated with degenerative disc disease.

The FDA gave rexlemestrocel-L a regenerative medicine advanced therapy (RMAT) designation in February, which sent the Mesoblast share price 11% higher.

RMAT designations speed up the development of therapies that address unmet medical needs for serious or life-threatening conditions.

What did management say?

Mesoblast CEO Dr Silviu Itescu said:

We appreciate the strong support from our major shareholders as we look forward to commercializing our platform technology and bringing the first FDA approved treatment to children with life-threatening SR-aGVHD.

Mesoblast share price snapshot

The Mesoblast share price is down 21% over the past 12 months and is trading flat so far this year.

This comes after the ASX biotech share hit a new 52-week high of $1.33 in February.

The post Why did the Mesoblast share price just dive 12%? appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor Bronwyn Allen has positions in Mesoblast. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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