Mesoblast shares slide on $65m capital raise announcement

Shares in Australian biotech Mesoblast (ASX: MSB) have fallen by 7 per cent today on news that the company has raised US$45 million (AUD$65 million) to bolster its commercialisation ambitions.

Mesoblast, which is developing treatments for a variety of conditions including steroid-refractory acute graft versus host disease (SR-aGVHD) in children, saw shares dive upon exiting a three trading day-long suspension from the ASX this morning.

While gains were made mid-morning, the company closed out the day of trading down 6.99 per cent to $0.86 per share.

However, shares in the biotech remain trading above the company’s five-year low of just 61 cents per share, which it hit on 30 June.

The market's response follows an update from the Melbourne-based company about a private placement to major shareholders which bagged the firm $65 million.

The raise was facilitated via the issue of 86.7 million fully-paid ordinary shares in a placement led by its largest shareholder M&G Investments, United Kingdom, and supported by major Australian and American shareholders.

The private placement was made at $0.75 per share, a 5 per cent discount to the thirty trading-day volume weighted average price. Post-placement, MSB says it now has approximately US$105.5 million in cash on hand.

According to Mesoblast, the funds will facilitate activities for the launch and commercialisation of its lead product, remestemcel-L, in the treatment of children with SR-aGVHD for which the company is currently seeking US Food & Drug Administration (FDA) approval.

It will also fund the commencement of a second Phase 3 clinical trial of rexlemestrocel-L to confirm a reduction in chronic low back pain associated with degenerative disc disease at 12 months.

“We are very appreciative of the ongoing strong support from our major shareholders who recognise the potential of our technology to make a difference to patients with severe inflammatory conditions,” Mesoblast chief executive Dr Silviu Itescu said.

“Our most advanced product, remestemcel-L, aims to save the lives of patients afflicted with SR-aGVHD, a condition with high mortality and in particular, an unmet need in children.”

The announcement comes as Mesoblast faces a shareholder class action, launched earlier this year by Phi Finney McDonald (PFM) to address the dramatic collapse in the company’s share price back in 2020.

The firm alleges Mesoblast engaged in misleading or deceptive conduct by misrepresenting the efficacy of its proposed stem cell-based treatment remestemcel-L (R-L), which at the time was pitched for use in patients suffering from COVID-19 and steroid-refractory acute graft versus host disease (SR-aGVHD).

PFM says shareholders were impacted on 11 August 2020, when shares fell by approximately 31 per cent after the US Food and Drug Administration (FDA) released information about its assessment of R-L for SR-aGVHD.