Emerging Australian life sciences companies are increasingly
interested in directly accessing foreign capital markets, in order
to grow not only their investor base but also their reputation and
profile in particular countries as their distribution channels and
operations become increasingly international. A direct listing on
an international exchange or a cross-listing on multiple exchanges
and the use of depositary receipt programs are being considered
more and more by these emerging companies.
Dual-listing and cross-listing
Two life sciences companies that have recently adopted the full
cross-listing structure are HeartWare International, Inc. (which
now has a market capitalisation of close to US$1 billion) and
Unilife Corporation (which now has a market capitalisation in
excess of US$300 million), both of which are represented by DLA
Piper. Both of these emerging medical device companies were
Australian companies listed on the ASX that recently successfully
redomiciled in the US by adopting a new US holding company
structure whereby that company is now listed on NASDAQ and the
shares in the holding company are also traded on the ASX in the
form of Chess Depositary Interests (CDIs). Both groups before the
redomiciliation had an Australian holding company, whose ordinary
shares were only listed on the ASX. By adopting this structure,
both companies were able to retain their strong connection to their
Australian investor base and also to access directly the large US
investment community (many members of which are restricted from
investing in non-US securities). A number of other Australian
companies are also currently considering adopting the same model
for their groups.
Cross-listing can provide a company with a number of benefits,
although the value of cross-listing will be highly dependent on
each company's individual circumstances and is clearly not
suitable for all companies. Where a company is seeking access to a
market that provides significant scope for capital raisings, the
liquidity of the market will be a key determinant, as well as the
different types of investors to which the company will be given
access. In addition, some markets are known for being particularly
receptive to certain industry sectors. For example, NASDAQ is a
natural target for life sciences and IT growth companies.
The HeartWare and Unilife model is, however, a major step for a
company to take. Currently, the more popular method of accessing
foreign equity markets is through the use of a depositary receipt
program, which is seen primarily as a way to improve liquidity in a
These programs essentially involve the issue of tradeable
depositary receipts, which represent interests in the underlying
securities of a company. A depositary receipt program can be
appealing to local investors in the relevant foreign market because
it provides access to international companies (and therefore
diversity in investments) while enabling trading and settling in
the local currency and in accordance with local procedure.
Based on 2009 activity, there has been an increase in the number
of companies electing to conduct their initial public offerings
using depositary receipts, with the majority being from the
The use of American Depositary Receipts (ADRs)
by Australian companies as a means to access US investors has also
increased in recent times, being a particularly attractive option
for smaller companies that are not large enough to list in the US.
141 ADR programs were launched by Australian issuers between 1983
and 2008, with the number of ADR programs on issue doubling between
2002 and 2008.
While the events of the last few years have caused many
companies to look inwardly, the attraction and importance of
accessing foreign capital will continue to increase for Australian
companies, not just from the traditional markets of the US and the
UK, but also the emerging markets of Asia and India, which are
increasingly keen to have foreign companies listed on their
exchanges. The options available to Australian life sciences
companies will be numerous, but the key for any interested company
will be to ensure that it chooses the right market and adopts the
right strategy in doing so.
This publication is intended as a general overview and
discussion of the subjects dealt with. It is not intended to be,
and should not used as, a substitute for taking legal advice in any
specific situation. DLA Piper Australia will accept no
responsibility for any actions taken or not taken on the basis of
DLA Piper Australia is part of DLA Piper, a global law firm,
operating through various separate and distinct legal entities. For
further information, please refer to www.dlapiper.com
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Liability was apportioned between the VMO, Dr.Brown, and the hospital on an 80/20 basis in favour of the hospital.
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