Why the Mesoblast (ASX:MSB) share price is on watch this week

The Mesoblast limited (ASX: MSB) share price will be on watch today if it returns from its trading halt.

This follows the announcement of its half year results and an equity-based private placement at the end of the week.

How did Mesoblast perform in the first half?

For the six months ended December 31, Mesoblast reported revenue of US$3.5 million and a loss after tax of US$48.9 million.

In respect to cash flows, the company revealed a net cash outflow from operations of US$60.1 million. This left Mesoblast with total cash and cash equivalents of US$77.5 million at the end of the period.

In light of its dwindling cash balance, the company advised that it has commenced a proposed equity-based private placement to a targeted industry investor to fund operations.

The placement

Mesoblast company is working to raise a rumoured US$100 million from a targeted industry investor.

According to the release, the proceeds from the offering will be used for working capital and to prepare for confirmatory trials in lead programs as per FDA requirements.

In addition, management notes that proceeds will enable the continued investment in manufacturing for further clinical development and to optimise process development including 2D and 3D bioreactor technologies. This is in preparation for commercial scale manufacturing, as well as maintenance of minimum unrestricted cash balances as required under our loan agreements.

What about the future?

Concerns about the company’s dwindling cash balance have been weighing heavily on the Mesoblast share price in recent months. And it isn’t hard to see why.

Management warned: “During the next twelve months, the Group intends to achieve cash inflows from existing strategic and financing partnerships, subject to the Group meeting future milestones and other performance conditions. Some or all of these cash inflows will be required for us to meet our forecast expenditure and continue as a going concern, although there is uncertainty related to our ability to access these cash inflows because the meeting of milestones and other performance conditions are not wholly within the Group’s control.”

“Management and the directors believe that the Group will be successful in the above matters and, accordingly, have prepared the financial report on a going concern basis, notwithstanding that there is a material uncertainty that may cast significant doubt on our ability to continue as a going concern and that the Group may be unable to realize our assets and discharge our liabilities in the normal course of business. is a material uncertainty that may cast significant doubt on our ability to continue as a going concern and that the Group may be unable to realize our assets and discharge our liabilities in the normal course of business.”

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.