Recently, the Australian Securities Exchange (ASX) and Ausbiotech, the peak body for the Life Sciences industry in Australia, released the second edition of the "Code of Best Practice for Reporting by Life Sciences Companies" (Code). This is a timely update from the first edition which was published in 2005, as it coincides with the ASX's recent revamp of the continuous disclosure obligations in Listing Rule 3.1, and its associated Guidance Note 8.

The Code is not mandatory but it is useful guidance for a sector which has not yet been able to establish a mandatory code such as the Australasian code for reporting of exploration results, mineral resources and ore reserves (the JORC code) used for mining companies. There are specific complexities for Life Sciences companies seeking to communicate with the broader investing public – the complex science is combined with long development pathways, regulatory hurdles and intellectual property issues. As such, the Code is a welcome aide to participants in the sector, whether disclosing or reading those disclosures.

The Code clearly explains the interaction between Listing Rule 3.1, Guidance Note 8 and the Code, although the revised Code now relies more on Guidance Note 8 to explain the basic concepts of disclosure and the circumstances in which the disclosure requirements (or the exemptions from them) may apply.

However the Code clearly notes specific issues of relevance to Life Sciences companies. An example is explaining the need to consider what is commercially sensitive information and how much can be withheld while still providing sufficient information to enable the investing public to make an assessment of the impact of a disclosed event on the value of the company. A further issue which is highlighted is the need to include carve outs from confidentiality clauses in joint venture contracts and the like to ensure that disclosure obligations (which cannot be avoided in those circumstances) can be satisfactorily met. New emphasis is given to the importance of maintaining confidentiality and the need to monitor public sources of information, including social media, for signs that an item of information is no longer confidential.

The detail of the Code itself as set out in section 4 is materially the same as the previous edition. However it has been reordered and the few significant changes are:

  • The inclusion of a new section on "The reimbursement path", focussing companies on the importance of that process to a company, and therefore its potential materiality.
  • A note that companies with earnings who become aware of any material difference in expected or actual earnings with market expectations should consider their obligation to disclose immediately.

  • Removal of the (previously short) section on consultant's reports.

The glossary has also been expanded and some of the existing definitions refined or elaborated on.

Notwithstanding the fact that this edition of the Code reflects evolution rather than revolution, its release is important to remind and confirm to Life Sciences companies that their disclosure obligations require real and detailed consideration rather than formulaic responses. While companies clearly need to be aware of the strict legal obligations arising out of Listing Rule 3.1 and the ASX's interpretation of those obligations as set out in Guidance Note 8, the unique characteristics of the Life Sciences industry mean that consistent reporting across companies can only assist in the understanding of the industry as a whole and be beneficial to all participants. If the publication of this revised edition of the Code is a further step towards developing the Life Sciences equivalent of the JORC code, it should be supported.

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