Australia: Navigating Continuous Disclosure In The Life Sciences Sector

Last Updated: 19 November 2018
Article by Lis Boyce, Geoff Cairns, Hamish Walton and Antony Bull

Continuous disclosure obligations cause difficulties for many listed organisations. These difficulties are further amplified in the life sciences sector where entities need to communicate complex scientific information to investors and are faced with long regulatory and reimbursement timelines making determinations on how and when to disclose information to the market, under ASX Listing Rule 3.1 more challenging.

These challenges drove the development of the 'Code of Best Practice for Reporting by Life Science Companies' (the Code) by ASX, Ausbiotech and other key representatives in the life science sector.

Life science entities should closely follow the Code as it focuses on the key drivers of value for the sector, providing a recommended disclosure framework.

What are a listed company's legal obligations for disclosure?

ASX Listing Rule 3.1 requires that entities immediately disclose market sensitive information that a reasonable person would expect to have a material effect on the price or value of the entity's securities.

Market Sensitive Information

Like all ASX-listed entities, life science entities must objectively assess what information would likely influence an individual who commonly invests in securities to acquire or dispose their securities. The Code provides extensive (but not exhaustive) examples that are relevant for life science companies.


Once market sensitive information becomes known to the life science entity they must immediately disclose it (unless an exception applies).

"Immediately" means in a prompt manner without delay. Life science entities should prepare for this by establishing a subcommittee of the board with delegated authority to release disclosures to the market. This is particularly important where speculation or inaccurate reports are published on social media and online platforms and the entity needs to correct the market.

Life science entities should also make use of trading halts to respond to unexpected events, when faced with an evolving situation (such as a deal that is under negotiation and close to signing) or where there is a large volume of complex material to analyse (such as clinical trial results).

Neuren Pharmaceuticals faced the challenge of "immediate" disclosure part way through a Phase 2 trial of a drug treating Rett Syndrome, when patients' parents commented on social media about their perceptions of the positive effect of the drug on their children. Neuren Pharmaceuticals promptly requested a trading halt and then later in the day issued a clarification statement that the "double blind" nature of the trial had not been compromised and that the actual results would only be known at the end of the trial.

Reasonable Person

Life science entities must contemplate what information an independent and prudent individual would expect to be disclosed. It is essential that entities do not "cherry pick" by over-emphasising positive information while downplaying or obscuring negative information. This is especially important when reporting on clinical trials. Entities must disclose the results of the trials regardless of their outcome, because that information will certainly have a material effect on the value of the securities.

Exceptions to ASX Listing Rule 3.1

A life science entity does not need to disclose information when these three requirements are fulfilled:

  1. At least one of these applies;

    • it would be a breach of law to disclose the information;
    • the information concerns an incomplete proposal or negotiation;
    • the information comprises matters of supposition or is insufficiently definite to warrant disclosure;
    • the information is generated for the internal management purposes of the entity; or
    • the information is a trade secret;
  2. the information is confidential and the ASX has not formed the view that the information has ceased to be confidential; and
  3. a reasonable person would not expect the information to be disclosed.

If at any time one of these ceases to apply, the entity must immediately disclose.

How does the Code assist?

The Code is a non-binding guideline for life science entities to use as a practical resource in applying the legal requirements of Listing Rule 3.1.

It promotes clear, timely and accurate market disclosures around key drivers of value for life science entities. Here is a summary of some of the guidelines:

Value Driver Commentary
Research and Development Activities
  • Ensure that reports are fair and balanced so investors can assess the commercial significance of the products under development.
Clinical Trials
  • Clearly state how the study is linked to the relevant regulatory process so investors understand the commercial or regulatory significance of the trial;
  • At the beginning, explain the endpoints, and other key aspects of the trial protocol; and
  • Report results by reference to the previously disclosed endpoints, structure and protocol.
Regulatory and Reimbursement Matters
  • Disclose steps in seeking regulatory approvals and in obtaining confirmation of reimbursement, and how those milestones affect the potential sale of products in the relevant jurisdictions
Intellectual Property and Regulatory Exclusivity Rights
  • Entities need to be clear on the extent of the rights and period of exclusivity conferred and its commercial significance. In some cases, this may need to be weighed up with confidentiality obligations to counterparties to licensing arrangements
Licensing and other agreements of Commercial Significance
  • Entities need to balance commercial sensitivity with the needs of investors to properly assess the value of the transaction entered into.
  • Disclose material deviations from quality control systems, such as GMP if the material deviation is likely to adversely affect an entity's product and potentially require a recall; and
  • Disclose the granting of manufacturing approval from a regulatory body, as this is a significant milestone.
Key Staff Appointments and Departures
  • In addition to mandatory disclosures (changes in directors or company secretary), entities should disclose incoming and departing key managers or advisory board members, particularly where the organisation has a small team.

Applying the Code

Life science entities need to recognise that the investors (both retail and institutional) may struggle to understand the entity's operations and strategy given the complexity of scientific information and long timelines in achieving regulatory and reimbursement milestones. By applying relevant guidance from the Code, a listed life science entity can strengthen its continuous disclosure practices, and the clarity of disclosures. This will promote informed and engaged investors and reduce the risk to the board of breaching the law.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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