Life science sector growing
This article appeared in the May 2012 edition of the Listed @ ASX newsletter.
More US life science companies are choosing to list on the Australian Securities Exchange. The latest, Ventus Medical Inc., launched a $40-million initial public offering (IPO) in April to develop technology that treats sleep-disordered breathing conditions.
It followed a $20-million IPO for Osprey Medical Inc., launched in March, to raise capital to develop technology that treats contrast-induced nephropathy, a form of kidney injury caused by X-ray visible dye that cardiologists inject during heart procedures such as angioplasty and stenting. Osprey’s Cincor System captures a large amount of dye before it circulates to the kidneys.
Listed@ASX asked Eddie Grieve, Senior Manager, ASX Listing Business Development, about ASX initiatives to encourage offshore life science companies to choose an Australia listing, and the exchange’s work in fostering a larger ASX-listed life sciences sector.
Listed@ASX: Eddie, why is the life science sector so important for ASX?
Eddie Grieve: ASX sees life science as a growth industry of the future. Well over 100 ASX-listed companies are already involved in pharmaceuticals, biotechnology or medical devices, and we expect that figure to grow steadily this decade. ASX is an ideal market to support emerging and established life science companies. This market has a long history of supporting capital raisings from early-stage companies, especially in the resource sector, and Australian investors are familiar with life science companies thanks to the success of Cochlear, CSL and ResMed and others over the past decade.
Listed@ASX: Another parallel between the life sciences and resource sectors is the need for companies to communicate often complex projects to investors, and build market confidence. How does ASX help life science companies communicate to the market?
Eddie Grieve: This goes back to 2004-05 when ASX worked with AusBiotech to produce the Code of Best Practice for Reporting by Life Science Companies (PDF 976KB). Both organisations saw a need to encourage listed life science companies to adopt high, consistent standards of communication and market disclosure, to promote investor confidence. Although the code was not part of ASX Listing Rules, it provided an important disclosure framework for life science companies to use. The code has also helped create a market “ecosystem” for life science companies, similar to what the Joint Ore Reserves Committee (JORC) Code has done in the mining industry.
Listed@ASX: What does ASX do now to help life science companies?
Eddie Grieve: We make extra effort to include life science companies in the ASX Spotlight Series, which involves ASX arranging for up to 18 small and mid-cap companies to present to institutional investors and meet one-on-one with them in Singapore, Hong Kong, New York or London each year. Three ASX-listed life science companies presented in New York and four in London. Their presentations were well received from overseas investors, who appreciated hearing about Australian companies involved in non-mining sectors. ASX is working with AusBiotech for our next Spotlight Series on May 24 in Hong Kong. AusBiotech’s event in Hong Kong is a day earlier, and we intend to co-ordinate the events to maximise exposure for Australian life science companies.
Listed@ASX: Does ASX participate in global life science conferences?
Eddie Grieve: Most recently, ASX conducted an IPO and Australian capital market workshop in San Francisco in January coinciding with the large JPMorgan Healthcare Conference held annually in that city. We worked with an Australian broking and advisory firms that have been active in recent US medical device company listings on ASX, to promote the strong benefits of accessing the Australian capital market to fund biomedical development and commercialisation. As a result, more US medical-device companies are showing interest in listing in Australia, and it is possible that some will follow the lead of GI Dynamics, REVA Medical, Bioniche Life Sciences, (US and Canadian life science companies that have listed on ASX since 2010) and list on ASX this year or next. ASX also sponsored an AusBiotech event last year that took small and mid-cap Australian life science companies to New York, and is proposing to sponsor a similar event this year.
Listed@ASX: Eddie, it seems that other recent ASX initiatives to help small and mid-cap listed companies could be especially useful for emerging life science companies.
Eddie Grieve: ASX’s proposed Equity Research Scheme could see more institutional and retail sharebroking research on ASX-listed life science companies. [The scheme starts next financial year, with ASX investing $1 million to fund a 12-month trial in which institutional and retail sharebroking firms receive funding to initiate coverage of eligible small and mid-cap companies.]
The life sciences sector is not well researched by the broking community; the majority of life science companies are too small for institutional investors. Having more high-quality, independent research on emerging life science companies could, over time, help raise their profile with local and offshore investors, support future capital raisings, and improve liquidity in their shares.
Proposed changes to ASX Listing Rules, which will make it easier for small and mid-cap companies to raise more equity capital through placements, also have a good fit in the life science sector. Emerging life science companies typically do not have significant revenues, and rely on issuing shares through placements, to raise equity capital to fund research or commercialisation strategies.
Listed@ASX: Eddie, does ASX need to think terms of decades with the life science sector?
Eddie Grieve: Yes and no. ASX aims to help the sector today with events, sponsorships and other initiatives. But we know from long experience that it can take a decade or more for some emerging life science companies to make it. We saw life science companies, such as Cochlear, ResMed and CSL list on ASX in the nineties and become much larger enterprises. Another group of life science companies listed earlier last decade and some, such as Mesoblast, have become billion-dollar companies. Others are in or nearing Phase III trials with the US Food and Drug Administration for their drug discoveries. Their potential success paves the way for a new group of emerging life science companies to raise capital through IPOs and list on ASX.
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