What's weighing on the Mesoblast (ASX:MSB) share price lately?

The Mesoblast (ASX:MSB) share price is getting attention following the company's latest capital raise. Here's a bit more background.

Gretchen Kennedy

Gretchen grew up in a small Connecticut town where she learned to read The Wall Street Journal as part of the grade six enrichment program. She moved to Australia in 2002, earned a Master of Arts (Professional Writing) and went on to spend eight years writing on Wall Street. In June 2018, Gretchen returned to Australia and has since developed a keen interest in all things ASX. In December 2020, she started writing for the Motley Fool. Gretchen's usually writing something, reading a book or chasing her dogs around.

Published March 8, 2021 2:18 pm AEDT

The Mesoblast Limited (ASX: MSB) share price has dipped 0.43% at the time of writing and is currently trading at $2.31 a share. This compares to the S&P/ASX200 Index (ASX: XJO), which has jumped 1.75% so far today.

In fact, over the past four months the Mesoblast share price has fallen more than 40%. So what's going on?

Man in business attire dragging large desk behind him — Image source: Getty Images

Why is the Mesoblast share price going down?

Mesoblast carried out a capital-raising exercise, which was announced last week. The cash injection came just in time, as concerns about Mesoblast's dwindling cash flow have been weighing on the company's share price over the past few months.

On 28 February 2021, the Australian Financial Review quoted the auditor of Mesoblast's latest results, who stated that, "material uncertainty exists that may cast significant doubt on the group's ability to continue as a going concern".

For the 6-month period ended 31 December 2020, Mesoblast posted a loss of $33.2 million and the company's deficit stood at US$599 million.

So what does the capital deal look like?

Mesoblast raised US$110 million issuing 60 million shares at A$2.30 in a private placement led by a US investor group.

The money will be used to keep pushing the company's products through the necessary United States Food and Drug Administration (FDA) approvals in the second and third quarters. For example, work will continue on gaining US regulatory approvals pertaining to a back pain treatment that uses Mesoblast's rexlemestrocel-L drug.

Funding will also be allocated toward generally progressing its remestemcel-L and rexlemestrocel-L platforms.

The business advised that it will invest in a commercial supply of remestemcel-L and continue to advance the manufacturing and development of rexlemestrocel-L.

Mesoblast share price snapshot

Mesoblast has a market capitalisation of $1.4 billion and there are presently 623.5 million shares outstanding.

Over the past year, the Mesoblast share price has climbed by 26%.

The company is a developer of medicinal treatments for severe and life-threatening inflammatory conditions. It has locations in Australia, the United States and Singapore, and has commercialised two of its products in Japan and Europe.

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