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The Rio Tinto Ltd (ASX: RIO) share price has recovered some of its sharper early morning losses but remains down 0.9% in early afternoon trading on Wednesday.

At the current $112.20 share price, the S&P/ASX 200 Index (ASX: XJO) miner is now down 9.1% since last Wednesday’s opening bell.

So, what’s going on?

Why is the ASX 200 mining stock under pressure?

Rio Tinto doesn’t solely mine iron ore.

The company also earns significant revenue from its copper and aluminium production.

But iron ore remains its largest revenue earner. Hence the price of the industrial metal has a large impact on the Rio Tinto share price.

Last Thursday, the miner reported record first-quarter iron ore shipments for the three months ending 31 March. And Rio received an average price of US$125 per dry metric tonne for the metal.

Which gives us some insight into why the Rio Tinto share price, alongside the other iron ore giants, has been selling off.

Not the record production, mind you.

But the price of iron ore, which has been falling hard since notching recent highs of US$132 per tonne on 15 March.

The price of the industrial metal slid another 2% overnight to US$102 per tonne. It was just last Wednesday that it was trading for US$120 per tonne.

Now that’s still well above the recent lows of US$78 per tonne posted in early November.

But with Chinese steel mills cutting back production and steel prices remaining depressed, the hoped-for resurgence in demand from the world’s number two economy’s reopening hasn’t played out the way many analysts expected.

And in what could throw up more headwinds for the Rio Tinto share price, analysts at Citi forecast the iron ore price could retrace to US$90 per tonne before finding support.

“We have been cautious on China’s steel demand and iron ore amid an uneven economic recovery and heightened policy risk, though things have unravelled sooner than our base case,” Citi analyst Wenyu Yao said.

But Goldman Sachs, for one, doesn’t appear to be fazed by the short-term pullback in iron ore prices.

Goldman has a buy rating on Rio Tinto shares with a $136.20 price target. That represents a 21% upside from current prices.

Rio Tinto share price snapshot

As you can see in the chart below, the Rio Tinto share price remains up 3% over the past 12 months, despite the recent pullback.

Shares in the ASX 200 miner have gained 27% since iron ore’s recent lows on 1 November.

The post Why has the Rio Tinto share price dived 9% in 5 days? appeared first on The Motley Fool Australia.

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More reading

• Investing in ASX 200 mining stocks? Here’s Citi’s latest iron ore price forecast
• Want to buy ASX 200 mining shares? Goldman Sachs says these are top buys
• Is the Rio Tinto share price a buy at under $120?
• Why Bank of Queensland, Lithium Power, Piedmont Lithium, and Rio Tinto are falling
• Goldman Sachs says the Rio Tinto share price is ‘compelling value’ after Q1 update

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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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The S&P/ASX 200 Index (ASX: XJO) salvaged some of its losses on news Australian inflation eased last quarter.

The index rebounded this afternoon to trade at 7,317.8 points at the time of writing, just 0.06% lower than it finished Monday’s session. That’s up from its intraday low of 7,285.3, which had marked a 0.5% fall.

Its recovery came as the Australian Bureau of Statistics (ABS) revealed the consumer price index (CPI) rose 7% over the 12 months to the March quarter. That marks a notable drop on the 30-year high of 7.8% reached in the December quarter.

What did the ABS report?

Australia’s CPI rose 1.4% in the March quarter, or 7% over the 12 months prior. That was the lowest quarterly rise since December 2021. Meanwhile, core inflation was 6.6%, down from 6.9% last quarter.

ABS head of prices statistics Michelle Marquardt commented on the latest CPI data, saying:

While prices continued to rise for most goods and services, many of these increases were smaller than they have been in recent quarters.

Annual inflation for goods of 7.6% was down from the 9.5% recorded in December, due to price falls for goods such as furniture, household appliances and clothing in the March quarter, as well as automotive fuel prices easing in recent quarters. However, annual inflation for services was 6.1%, up from 5.5% in the December quarter and is the highest since 2001.

What does easing inflation mean for the ASX 200?

As mentioned up top, the market has responded positively to the latest inflation figures.

That’s likely due to the impact they might have on the Reserve Bank of Australia’s (RBA’s) next interest rate decision, to be made on Tuesday.

The RBA put forward ten consecutive rate hikes between May 2022 and March 2023 in an effort to combat rising inflation by tightening consumer spending. It paused its streak in April, to the relief of investors and borrowers alike. The cash rate currently sits at 3.6%.

While the inflation rate remains well above the RBA’s target of 2% to 3%, the drop still brings hope the rate hiking cycle may have broken.

Betashares chief economist David Bassanese tweeted shortly after the latest CPI data dropped, saying:

[T]hat’s good enough! No RBA rate hike next week, and still see no further hikes this year.

CreditorWatch chief economist Anneke Thompson, however, disagrees. She says inflation is “still showing cause for concern” and will likely result in another hike at Tuesday’s RBA board meeting.

Speaking in Canberra, Treasurer Jim Chalmers commented that today’s release shows “inflation has passed its peak and is now moderating,” according to The Australian.

The post ASX 200 trims losses on latest inflation news appeared first on The Motley Fool Australia.

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More reading

• First Republic Bank shares just crashed 50%. Here’s how ASX 200 bank stocks are responding
• Mineral Resources share price tumbles 9% despite record quarterly lithium shipments
• 5 things to watch on the ASX 200 on Wednesday
• How anyone can turn $20k into $1 million with ASX shares
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. 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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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a number of broker notes this week.

Three ASX shares brokers have named as buys this week are listed below. Here’s why they are bullish on them:

BHP Group Ltd (ASX: BHP)

According to a note out of Morgans, its analysts have retained their add rating on this mining giant’s shares with a slightly trimmed price target of $50.40. While BHP’s third-quarter update was short of consensus estimates, it was in-line with what Morgans was expecting. In light of this, the broker believes that investors should be taking advantage of any share price weakness to accumulate shares. The BHP share price is trading at $43.68 on Wednesday.

Telstra Group Ltd (ASX: TLS)

Analysts at Goldman Sachs have reiterated their buy rating on this telco giant’s shares with an improved price target of $4.70. According to the note, the broker has boosted its earnings estimates to reflect larger than expected mobile price increases. Goldman expects prices to increase by $4-6 per month now, compared to its previous forecast of a $2-3 per month lift. The Telstra share price is fetching $4.31 today.

Xero Limited (ASX: XRO)

A note out of UBS reveals that its analysts have upgraded this cloud accounting company’s shares to a buy rating with an improved price target of $109.00. UBS believes that Xero is well-placed to deliver stronger than expected free cash flow in the coming years. Particularly given its belief that its strong growth will continue despite its recent cost reductions initiative. The Xero share price is trading at $93.50 this afternoon.

The post Top brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

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More reading

• Down 8% in a week, is the BHP share price facing more headwinds in 2023?
• Investing in ASX 200 mining stocks? Here’s Citi’s latest iron ore price forecast
• Here’s why Goldman Sachs just became even more bullish on Telstra shares
• Pro Medicus shares: Bull vs. Bear
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Telstra Group and Xero. 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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The All Ordinaries Index (ASX: XAO) is sliding 0.15% today, but this ASX All Ords stock is falling further.

The Synlait Milk Ltd (ASX: SM1) share price is tumbling 22.96% at the time of writing, currently trading at $1.51 a share.

Let’s take a look at what this ASX All Ords stock reported to the market today.

What’s going on?

This ASX All Ords stock appears to be sliding today amid a guidance downgrade and news of lower milk prices.

Synlait expects to deliver an FY23 result of between a net loss of $5 million and a net profit after tax (NPAT) of $5 million.

This is down from the company’s previous prediction of profit between $15 to $25 million.

Looking ahead, Synlait is aiming to broaden its customer base, lower risk, lessen its cost base, and improve its balance sheet.

Explaining the guidance upgrade today, Synlait said:

Further Advanced Nutrition demand reductions, mostly from one of Synlait’s customers, which impact consumer-packaged infant formula volumes and base powder production, are expected to have an NPAT impact of approximately $16.5 million in FY23.

The remainder of the NPAT impact (approximately $3.5 million) is attributable to less material factors, including higher financing and supply chain costs.

Meanwhile, Synlait has also downgraded its outlook for the base milk price in the 2022/2023 season to $8.30kgMS. This is down from a previous forecast of $$8.50/kgMS

The company noted the “slower than expected” Chinese recovery and “negative shift in sentiment towards the broader global economy” have resulted in “falling commodity prices”.

Share price snapshot

The Synlait Milk share price has lost 51% in the last year.

This ASX All Ords stock has a market capitalisation of about $333 million based on the latest share price.

The post Why did this ASX All Ords stock just crash 23%? appeared first on The Motley Fool Australia.

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More reading

• Why A2 Milk, Mesoblast, Mineral Resources, and Synlait shares are sinking
• 2 small-cap ASX shares this fund manager is excited about
• Why Atlas Arteria, Kingsgate, Kogan, and Synlait Milk shares are dropping today
• Why Lake Resources, Latitude, Synlait, and Woodside shares are falling today
• Guess which ASX All Ords stock is plummeting following an 80% profit dive

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. 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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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a small decline. The benchmark index is currently down 0.1% to 7,314.2 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are dropping:

A2 Milk Company Ltd (ASX: A2M)

The A2 Milk share price is down 4% to $5.49. This morning, A2 Milk revealed that it has lowered its total forecast production volume needs for English label consumer-packaged infant milk formula by ~1,650 metric tonnes for the period March through to June. This is due to significant daigou weakness, inventory build-up, and distribution model adjustments.

Mesoblast Ltd (ASX: MSB)

The Mesoblast share price is down almost 12% to 87.5 cents. This follows news that Mesoblast has undertaken a private placement to its existing major US, UK, and Australian shareholders. The biotech company raised approximately US$40 million at a discount of 85 cents per share.

Mineral Resources Ltd (ASX: MIN)

The Mineral Resources share price is down 9% to $72.91. Although the mining and mining services company just reported a record quarter for its lithium operations, its mining services business had a very tough time. This has seen the company downgrade its guidance accordingly. Management also warned that its lithium operations are likely to achieve only the low-end of their guidance range.

Synlait Milk Ltd (ASX: SM1)

The Synlait Milk share price has crashed 20% to $1.50. This morning, this dairy processor downgraded its full-year earnings guidance by NZ$20 million less than a month after releasing it to the market. It now expects earnings in the range of a NZ$5 million loss to a NZ$5 million profit. This was driven largely by A2 Milk’s reduced demand for infant formula.

The post Why A2 Milk, Mesoblast, Mineral Resources, and Synlait shares are sinking appeared first on The Motley Fool Australia.

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More reading

• Why did this ASX All Ords stock just crash 23%?
• Why did the Mesoblast share price just dive 12%?
• Mineral Resources share price tumbles 9% despite record quarterly lithium shipments
• A2 Milk share price on watch following worrying update
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 recommended A2 Milk. 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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Shares in Fortescue Metals Group Limited (ASX: FMG) have tumbled 5% over two trading days to trade slightly over the $20 mark, likely leaving many considering buying the dip.

The iron ore giant posted its quarterly update on Monday, as The Motley Fool Australia reported. That saw the market bid its share price 4.15% lower.

And it appears to be backing up that fall today. Right now, shares in Fortescue are down 1.18%, trading at $20.515.

So, has the recent slump put the stock in the buy zone? Let’s take a look.

Fortescue shares trading for around $20 apiece

At around $20, the Fortescue share price is trading close to its 2023 low. Though, it’s still higher than it has been in recent memory.

The stock is 4% above where it was this time last year and nearly 79% higher than it was three years ago. And it’s been a volatile road for investors. Fortescue shares soared 113% in 2020, plunged 18% in 2021, and recovered 7% in 2022.

The company behind the stock looks quite different today than it did in 2020. Fortescue is one of the ASX 200’s three iron ore majors, deriving most of its revenue from the steel-making ingredient. It also launched its hydrogen-focused renewable energy leg, Fortescue Future Industries (FFI) in 2021.

What might influence Fortescue shares in the near future?

The majority of Fortescue’s revenue is tied to the iron ore price. Thus, the material’s value has a significant influence on its share price.

It’s unfortunate, then, that the commodity has been struggling over the last month.

And while brokers’ opinions on where it could go from here are mixed, Citi thinks there might be more pain to come. The broker is said to have tipped the iron ore price to fall to as low as US$90 a tonne this year – 11% lower than current levels, my Fool colleague Bernd reports.

However, it’s also worth noting Fortescue is bolstering its production through its Iron Bridge project. The project is expected to produce 22 million tonnes of high-grade iron ore annually.

The pros and cons of FFI

Now to the company’s green energy division. In my opinion, FFI brings both mountains of potential and some serious risks.

I believe the green energy transition could be a maker or breaker of companies, and Fortescue may have positioned itself to be a leader in the space. However, investors hoping to see a profit from FFI could be in for a long wait.

In the meantime, FFI can demand up to 10% of Fortescue’s net profit after tax (NPAT). Not to mention, the ASX 200 company has revealed a $9 billion plan to decarbonise its Pilbara operations.

All that spending has the potential to cut into shareholders’ dividends in the coming years.

If I had $1,000 to invest…

I personally don’t think Fortescue shares are a buy right now due to the steep risk-to-reward ratio on the table. If I had $1,000 to invest I’d probably steer clear of the iron ore icon.

And I’m not alone. Goldman Sachs has a sell rating and a $15.80 price target on Fortescue shares – representing a potential 23% downside.

Meanwhile, the slightly more bullish CLSA is said to tip the stock to trade 1.5% lower at $20, slapping it with a reduce rating, as per The Australian.

The post Should I snap up Fortescue shares while they’re around $20? appeared first on The Motley Fool Australia.

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More reading

• Investing in ASX 200 mining stocks? Here’s Citi’s latest iron ore price forecast
• Invested in Fortescue shares during the July 2022 dip? Here’s the dividend yield you’re earning today
• Fortescue share price plummets 5% amid weaker production
• Fortescue shares: Bull vs. Bear
• ASX 200 mining shares sink as iron ore price nears 2023 low

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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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The S&P/ASX 200 Index (ASX: XJO) has returned from the public holiday in a subdued fashion. In afternoon trade, the benchmark index is down 0.1% to 7,315.5 points.

Four ASX shares that are not letting that hold them back are listed below. Here’s why they are pushing higher:

Core Lithium Ltd (ASX: CXO)

The Core Lithium share price is up 2.5% to $1.00. Investors have been buying this lithium miner’s shares following the release its third-quarter update. It was a busy three months for Core Lithium. During the period, it completed the construction of its Dense Media Separation (DMS) plant and achieved its first revenue from the maiden DSO shipment of 15,000 tonnes of spodumene concentrate to a China’s Sichuan Yahua.

Kogan.com Ltd (ASX: KGN)

The Kogan share price is up 10% to $3.97. This follows the release of the ecommerce company’s quarterly update. Although Kogan reported yet another big drop in sales, it achieved three consecutive months of positive EBITDA. It also announced a surprise on-market share buy-back of up to 10% of its issued shares.

Northern Star Resources Ltd (ASX: NST)

The Northern Star share price is up 3% to $13.96. Investors have been buying Northern Star and other gold miners on Wednesday following a rise in the gold price. This appears to have been driven by demand for safe haven assets amid banking sector concerns. The S&P/ASX All Ordinaries Gold index is up 2.6% today.

Pointsbet Holdings Ltd (ASX: PBH)

The Pointsbet share price is up 10% to $1.56. This is despite there being no news out of the sports betting company. However, the company is understood to be in the process of selling its US operations. Some investors may believe this will unlock value for shareholders.

The post Why Core Lithium, Kogan, Northern Star, and Pointsbet shares are storming higher appeared first on The Motley Fool Australia.

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More reading

• Core Lithium share price pops on Q3 report
• Kogan share price jumps 10% amid plans for share buyback cash splash
• 5 things to watch on the ASX 200 on Wednesday
• Why are ASX lithium shares powering higher today as the resource sector bleeds?
• These are the 10 most shorted ASX shares this week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Kogan.com and PointsBet. The Motley Fool Australia has positions in and has recommended Kogan.com. The Motley Fool Australia has recommended PointsBet. 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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The BHP Group Ltd (ASX: BHP) share price opened sharply lower today.

At $42.74 per share, the S&P/ASX 200 Index (ASX: XJO) iron ore miner was down 3.3% from Monday’s closing price of $44.17 a share.

While the BHP share price has recouped much of those losses, the miner is still down 1.11% in intraday trading this afternoon. And shares are down a precipitous 7.6% since last Wednesday’s close.

What can ASX 200 investors expect next?

While BHP earns a significant slice of its revenue from copper and a sizeable amount from coal, iron ore remains the company’s biggest revenue earner.

As you’d expect, then, the iron ore price has a big impact on the BHP share price.

And the price of the industrial metal has been falling hard since hitting recent highs of US$132 per tonne on 15 March.

As for the past week’s steep decline in BHP shares, that was fuelled by a 15% fall in the iron ore price. It was just last Wednesday that the steel-making metal was trading for US$120 per tonne. Having dropped another 2% overnight, iron ore is currently trading for US$102 per tonne.

So, what can ASX 200 investors expect for the BHP share price next?

Well, if the analysts at Citi have it right, there could be some more headwinds ahead in 2023.

Citi analyst Wenyu Yao believes the iron ore price could drop to US$90 per tonne amid lower steel production and narrow profit margins at China’s iron ore hungry steel mills.

“We have been cautious on China’s steel demand and iron ore amid an uneven economic recovery and heightened policy risk, though things have unravelled sooner than our base case,” Yao said.

“We see potential risk for further downside below $100 a tonne, if steel demand fails to show meaningful improvement.”

Further downside would most likely see BHP, and the other ASX 200 iron ore shares, remain under pressure until demand picks back up.

That hasn’t appeared to dissuade Morgans though. The broker has raised BHP to an add rating, with a $50.40 price target.

BHP share price snapshot

As you can see in the chart below, the BHP share price is down 4% over the past 12 months.

However, investors who snapped up shares in the ASX 200 miner when iron ore was trading at recent lows on 1 November will be sitting on gains of 17%.

The post Down 8% in a week, is the BHP share price facing more headwinds in 2023? appeared first on The Motley Fool Australia.

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More reading

• Investing in ASX 200 mining stocks? Here’s Citi’s latest iron ore price forecast
• 5 things to watch on the ASX 200 on Wednesday
• Lowest ASX bank yield: Are CBA shares still worth it?
• Leading brokers name 3 ASX shares to buy today
• Why BHP, InvoCare, Lake Resources, and South32 shares are dropping today

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. 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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Australian Foundation Investment Co Ltd (ASX: AFI), or AFIC, is one of the largest listed investment companies (LICs) on the ASX. One of its key figures recently decided to buy more AFIC shares, which could be seen as a positive sign as he buys the dip.

Investors sometimes worry what it means when a leadership figure decides to sell – could it mean that bad news is coming?

However, an investment by a leadership figure is usually positive.

Let’s have a look at how heavily the insider has backed the business.

Director buys AFIC shares

AFIC director Craig Drummond is also the president of the Geelong Football Club, chair of Transurban Group (ASX: TCL), and former Medibank Private Limited (ASX: MPL) CEO. He has been an AFIC director since July 2021.

On 14 April 2023, he decided to add a total of 50,000 AFIC shares to his holding. He bought 18,000 shares for $7.26 per share and he bought 32,000 shares for $7.27 per share. This is a total investment of around $363,000. That’s a large investment considering he only had 13,721 AFIC shares before the investment.

Is this a good sign?

For AFIC, I think it definitely is. The AFIC share price is more than 10% lower than where it was 12 months ago, so investors are able to grab a slice of it for a cheaper price.

I think it’s an interesting sign that Drummond chose the price he did to buy at. It’s essentially where the current AFIC share price is sitting.

AFIC owns a portfolio of blue-chip ASX shares. Investors get a monthly insight into what the underlying value of the LIC is. At 31 March 2023, the before tax net tangible assets (NTA) was $7.10 per share. This means the current AFIC share price is at a premium of just 2% to this March 2023 figure.

This is essentially (close to) the lowest premium it has been at for at least the past two years.

While it would be preferable to buy AFIC shares at a discount to the NTA, it hasn’t been possible over the last few years.

AFIC has been an excellent provider of stable passive income in the form of dividends.

However, the AFIC net asset per share growth plus dividends, including franking, has underperformed the S&P/ASX 200 Accumulation Index (ASX: XJOA) (including franking) over the past year, three years, five years, and ten years.

For me as an investor, who is looking at a wide range of potential ASX shares, I’m not sure it makes sense to invest in an LIC that is trading at a premium even though it has underperformed the index.

But, it is cheaper than before and it provides an easy way for investors to invest in ASX shares while receiving good dividends. So, I wouldn’t put it at the top of my list today, but it does seem to be a decent long term option.

The post This director has been buying the dip in AFIC shares. Should you? appeared first on The Motley Fool Australia.

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More reading

• Here’s how I’d dip my toe in the Aussie stock market with $500
• Are AFIC shares a smart investment for beginner investors?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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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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

• Here’s why Mesoblast shares are in a trading halt today

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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