Unfortunately for its shareholders, the Mesoblast limited (ASX: MSB) share price has had a terrible start to the week.
In morning trade the regenerative medicine company's shares fell as much as 11.2% to $2.12 before recovering slightly.
The reason for today's decline was the news that Mesoblast has successfully completed a fully underwritten institutional placement of 26.25 million new shares to raise approximately US$40 million.
The placement price of $2.00 per share represents a significant 16% discount to the last close price.
According to the release the proceeds will be used for the company's ongoing Phase 3 clinical programs, as well as for manufacturing requirements related to product commercialisation.
Despite today's decline, Mesoblast's share price has still rallied an astonishing 53% so far in 2017.
The catalyst for this rally was news that its drug for acute Graft Versus Host Disease (aGVHD) has been awarded "fast track" designation status by the U.S. Food and Drug Administration (FDA).
Fast track designation can shorten the FDA review process by as much as 10 months, potentially saving the company large sums of money and speeding up the commercialisation of the drug.
Its application for fast track status was supported by data from 241 paediatric patients already treated with its aGVHD drug. The next target for the company will be to attain conditional FDA approval for the drug.
Should you buy the dip?
With things looking reasonably bright for the company at long last, I can see why investors might be tempted to buy the dip in its share price today.
But there is still a lot of work to be done and a lot of money to be spent until the company will see sales of the drug hit its top line. In light of this I would suggest investors hold off an investment at this stage, at least until its phase 3 trials have been completed.
In the meantime I feel investors would be better served with an investment in CSL Limited (ASX: CSL) or Mayne Pharma Group Ltd (ASX: MYX).
