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Here’s why the Mesoblast (ASX:MSB) share price is tumbling lower today

A businessman holds his glasses in concern, indicating uncertainly in the ASX share price
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The Mesoblast limited (ASX: MSB) share price has returned from its trading halt and tumbled lower.

At the time of writing, the biotech company’s shares are down 4.5% to $2.35.

This latest decline means the Mesoblast share price is now down 59% from its 52-week high of $5.70.

Why is the Mesoblast share price tumbling lower today?

Investors have been selling Mesoblast shares after it announced a US$110 million private placement led by a strategic US investor group. This includes one of the largest private operators of ambulatory surgical centres, SurgCenter Development.

According to the release, the company raised the funds via the issue of 60 million shares at $2.30 per share. This represents a 6.5% discount to the Mesoblast share price prior to its trading halt.

Following the completion of the private placement, Mesoblast will have pro-forma cash-on-hand of US$187.5 million.

In addition to the shares, the investors have also received warrants to acquire a further 15 million shares at a price of A$2.88 per share. This could raise a further A$43.2 million (US$34 million) on or before 15 March 2028.

The company also has a right to call on the funds at any time during the term. This is subject to the Mesoblast share price trading at $4.32 or higher for at least 45 consecutive days.

Management commentary

Mesoblast’s Chief Executive, Dr Silviu Itescu, was pleased with the investment.

He said “We are pleased to receive a strategic investment from the principals of SurgCenter Development, one of the largest private operators of ambulatory surgical centers in the US specializing in spine, orthopaedic and total joint procedures.”

“We expect the deep healthcare knowledge and expertise of this investor group will be of great benefit to the company. The network and infrastructure of surgeons and ambulatory centers operated by SurgCenter may provide unique synergies to facilitate development and market access for rexlemestrocel, if approved, in patients with chronic lower back pain.”

What will the proceeds be used for?

The release explains that private placement will provide financial strength for operational and regulatory initiatives across multiple products. This comes at a time when the company undertakes important late-stage meetings with the United States Food & Drug Administration (FDA) in the second and third quarters of this calendar year.

In addition, funds will be used to invest in the commercial supply of remestemcel-L ahead of potential approval for graft versus host disease in children and in optimised manufacturing for larger market opportunities.

Management also intends to use some of the proceeds for advancing manufacturing and the development of the rexlemestrocel-L platform to meet commercial objectives. This is for chronic heart failure and chronic low back pain due to degenerative disc disease.

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Motley Fool contributor James Mickleboro 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 Bruce Jackson.

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