Civica
Financial intelligence for Asia's healthcare markets
 
 
Remember me:

Analysis: Why float on the ASX

In the first of a series from stock exchanges around the region, Josh Collard, listings business development manager at the Australian Securities Exchange, explains why the ASX is attractive to healthcare companies.

The Australian Securities Exchange (ASX) is home to more than 160 healthcare companies with a combined market capitalisation close to A$150 billion (US$112.3 million), and is a highly active market for initial public offerings (IPOs). There have been 36 healthcare IPOs in the past three years, collectively raising A$5 billion.

The ASX healthcare sector is diverse, with around 50% of companies in healthcare (around half of these are involved in med-tech), 30% in biotech, and the remaining 20% split between pharmaceuticals and life sciences. The top 10 stocks account for 85% of the total market capitalisation of the sector, including some well-known names such as CSL, Resmed and Cochlear. Beyond the large caps there is a long tail of smaller companies. That is where the appeal lies for many – viewing the exchange as an attractive capital raising venue for early stage companies to fund both their commercialisation and growth aspirations.

There have been two waves of healthcare listings on ASX since the early 2000s. The first was during the period from 2003 to 2007 when higher-risk capital was looking for growth opportunities outside of the traditional tech sector following the dot-com crash. During this period ASX saw over 70 healthcare listings, before a slowdown following the start of the resources boom in the mid-2000s when a large proportion of higher risk capital was reallocated to mining stocks. As the resources boom began to ease in 2012, higher risk capital initially moved into cash, before rotating into the healthcare and technology sectors from 2013. Since then, ASX has attracted 44 healthcare listings and the IPO window remains open today.

There are several key differences between the first wave of ASX healthcare listings and the current wave. Companies coming to market in the current wave are generally more mature, closer to (or generating) revenue and investors are better educated about the sector. In terms of subsector trends, the first wave saw a larger number of biotechnology companies coming to market, whereas the current wave has seen momentum with medical device and digital health companies. A number of early stage medical marijuana companies have also listed over the past 12 months.

ASX has a long history of supporting early stage companies, and unlike some of its peers, the exchange offers a single main board listing – that is, it does not have a junior board. This has advantages for prospective candidate companies, as many investment mandates exclude junior boards, limiting the capital pool available to them. ASX also has a very active retail investor base that, alongside specialist small cap funds, is supportive of early stage companies seeking to raise capital.

ASX has a unique value proposition that helps it attract companies. It offers the ability to list earlier on a globally recognised market, access an investor base that is active in small and mid-cap stocks and achieve index inclusion at an earlier stage than would be possible on other major markets. For example: entry to the S&P/ASX 300 index starts at a market capitalisation of A$300million, whereas entry to most other global indices starts at US$4-5 billion market capitalisation. Once a company enters the main index, many institutional funds are mandated to invest. Global funds are active in Australia enabling companies to gain access to international investors, with around 45% of total institutional investment in the S&P/ASX 200 coming from offshore.

Over the past four years there has been significant growth in the number of cross border listings that ASX has attracted. A combination of factors has helped this. Australia has one of the world’s largest pools of investable funds, the largest in Asia, with most funds allocated to equities mandated to invest in ASX listed companies. There is also increasing demand for foreign companies from Australian investors in an effort to diversify the menu. ASX has been particularly active marketing to companies that have limited access to capital in their domestic markets, or companies that originate in large home markets that view a public listing as preferable to other sources of funding, such as private equity or venture capital investments. Foreign companies in the sector are also attracted to Australia to take advantage of the competitive r&d tax concessions that are available.

Healthcare companies have found their way to ASX from countries such as New Zealand, Singapore, Ireland and the US. Despite the US having the world’s largest capital markets, many companies in the small and mid-cap world struggle to attract attention, and seek to explore external options until they are of a scale sufficient for the US public markets. An example is HeartWare International, which listed on ASX in 2005 with a market capitalisation of A$80 million, before dual listing onto NASDAQ in 2009. It was subsequently acquired by Medtronic last year for US$1.1 billion. Other recent US success stories include Osprey Medical, which is based in Minnesota, and AirXpanders, which is based in California. Both companies have raised several rounds of capital via an ASX listing to fund their operations.

ASX continues to promote the market for healthcare companies, both at home in Australia and abroad. This trend of foreign companies utilising the ASX as a capital raising venue is set to continue, and investors can expect to see an expanding menu of healthcare companies across various geographies and sectors.

Posted on: 03/05/2017 UTC+08:00


News

Top Glove has put months of speculation to rest. The world’s largest rubber glove manufacture is to acquire Adventa Capital-owned Aspion. Upon completion of the proposed transaction, Top Glove will emerge the world’s largest surgical glove manufacturer, in addition to being the world’s largest rubber glove manufacturer.
Grant Thornton has given the nod to plans by ASX-listed Asian American Medical Group (AAMG) to take a 95.1% stake in Hippocrates Development (HDSB) for M$91.4 million (US$21.6 million).
As Ryman Healthcare, New Zealand’s largest listed retirement village operator, released its first half figures it also announced plans to build a new NZ$95 million (US$65.3 million) retirement village in Mount Martha in Victoria.
After a challenging 2017, Virtus Health, Australia’s largest fertility clinic network, has said that financial performance in the first four months of FY18 is broadly in line with expectations.
Shares in Australian healthcare group Admedus jumped 7.4% after the group announced that it had received regulatory approval to sell the group’s regenerative tissue product in India. Syncronei Medical will be the exclusive commercial partner.
Integral Diagnostics (IDX), Australia’s fourth largest radiology group, has said that it expects to report high single digit growth in profits for 2018. This compares to previous expectations for profits to be moderately higher in the financial year.
Medical diagnostic imaging services provider Capitol Health has said that it expects to return to profitability in the next financial year and has upgraded its outlook for the year.
Paragon Care, a leading distributor and manufacturer supplying medical equipment to hospitals, has said that it is “targeting strong growth in 2018 across all key metrics”.



Analysis

The promise of a bottom in Singapore’s office market has caused its ranking as an investment market to soar from next-to-bottom last year to third in this year’s “Emerging Trends in Real Estate Asia Pacific 2018” report, a real estate forecast jointly published by the Urban Land Institute (ULI) and PwC.
Kamal Brar, vice president and general manager of Asia Pacific for data software company Hortonworks, looks at how data analytics can provide effective and affordable healthcare in Singapore.
The latest Sun Life Financial Asia Diabetes Awareness Study reveals an alarming knowledge gap in diabetes. A third of Asian women who are or were pregnant in the past three years are unaware of the risk of developing gestational diabetes in pregnancy, while one in seven births in Asia is currently affected by gestational diabetes.
Gan Kim Yong, Singapore’s minister for health, explains why the private sector needs to get behind the National Electronic Health Record System.
Business leaders in Asia Pacific’s healthcare industry are showing urgency in embracing the fourth industrial revolution, according to the Microsoft Asia Digital Transformation Survey. More than three-quarters of them believe that they need to transform to a digital business to enable future growth and yet only a quarter said that they have a full digital strategy in place today.
An agreement for an additional US$15 million funding from the World Bank will be used to expand health and nutrition coverage in the Lao People's Democratic Republic. It is expected to benefit more than 1 million people across 14 provinces.
Bart Van den Mooter, CEO of the TforG Group, looks at the drivers behind the rapid growth in Asia’s medical tourism market.
The ambitious healthcare agenda under Moon Jae-in's liberal presidency will seek to expand national health insurance reimbursement and limit the burden of excessive medical costs, while overhauling the healthcare system. BMI Research looks at the winners and the losers in the presidential agenda.


Civica

Podcasts

AON

Hedge Fund Focus

HealthInvestor Asia twitter feed
HIA Indices