The demand on the health sector has never been more evident, as the world scrambles to come up with a treatment for coronavirus.

Key points: The value of the health care sector on the ASX has risen nearly 57 per cent in the past year

The value of the health care sector on the ASX has risen nearly 57 per cent in the past year Newcastle company Viralytics was sold to a US pharma giant for $502 million in 2018

Newcastle company Viralytics was sold to a US pharma giant for $502 million in 2018 There are calls for extra funding to commercialise Australian research and development

More than 1,000 people have been killed by the virus and more than 42,000 people have been infected worldwide.

Australian scientists developed a lab-grown version of the disease last month, a key step in the search for a treatment.

It is these types of discoveries that are putting Australia's growing biotech industry firmly in the sights of global pharmaceutical companies.

A team of scientists in Newcastle, NSW, led by Darren Shafren, spent almost two decades working on a way to fight cancer with a virus.

Darren Shafren leads the team behind Viralytics under a new company name, ImmVirX. ( ABC News: Rachel Pupazzoni )

"Our whole theory is to use naturally occurring viruses to help new types of therapies to enhance the immune response and reduce the response rate in some of the harder to treat cancers," Professor Shafren told The Business.

Australian innovations in foreign hands

He sold his company Viralytics and its creation, Cavatak, to pharmaceutical giant Merck (known as MSD outside the USA) for $502 million in 2018.

"Even though it's hard handing it over, we felt like we were handing it over to someone in a better position to really finalise it and take it to market," he said.

Cavatak uses a common cold virus to target melanoma, lung and bladder cancer cells.

Trials have shown that when used in combination with immune checkpoint therapies like MSD's Keytruda, Cavatak can almost double the rate at which cancer is destroyed.

MSD will progress Professor Shafren's work on to phase-three clinical trials.

The same team, under new company ImmVirX, is now targeting colorectal, ovarian and liver cancer.

"The body has a defence mechanism against viruses and we're trying to leverage that and to parlay that into the responses of immune checkpoint therapies," Professor Shafren said.

The therapy works by introducing virus cells into a cancer patient, which find their way into the cancer cells and start replicating.

"When the virus replicates, it blows the cancer cells up like a balloon and they explode," Professor Shafren explained.

Cancer cells shown under a microscope (left). After being destroyed by virus cells, they explode (right). ( Supplied: ImmVirX )

As the virus continues to replicate, it infiltrates more cancer cells and the process is repeated.

The patient's natural immune system also kicks in and tries to kill the virus cells and, as a by-product, some of the cancer cells are destroyed as well.

"You have to try to trick it," Professor Shafren said.

CSL climbs the ranks on the ASX

The world's leading plasma therapy company, CSL, is the big kid on the block when it comes to biotech in Australia.

CSL began life as the Commonwealth Serum Laboratories in 1916 when Australia needed to secure its own drug supplies during World War I.

Biotech giant CSL began life as Commonwealth Serum Laboratories in 1916. ( Supplied: CSL )

It was privatised in 1994 and those early investors paid $2.30 a share in the initial public offering. Today, CSL shares are worth more than $320.

CSL creates plasma-derived therapies and specialises in immunoglobulin, which helps the body fight bacteria and viruses, and albumin, which regulates blood pressure and is widely used in operating theatres.

The company's market capitalisation has been climbing for months, threatening to overtake the Commonwealth Bank.

"CSL has had a very strong year in terms of both their earnings and their share price performance and there's a number of other Australian healthcare names that have done very well and become a lot larger as well," JP Morgan executive director David Low told The Business.

The value of the broader healthcare sector in Australia has grown 57 per cent in the past 12 months.

The price of health care stocks listed on the Australian share market have soared. ( ABC News )

Medical device company ResMed, another market leader, was born out of work by the University of Sydney, when it developed the first continuous airway pressure device for people with sleep apnoea in 1981.

ResMed is now dual listed on the ASX and the New York Stock Exchange and last month it reported 14 per cent revenue growth for the first half of the financial year.

Mr Low believes the health sector's importance to the Australian economy will increase as it continues to grow.

"Australia has a leading position in health through our universities, through the Melbourne biotech hub, and I think there is more good news to come as it does become a very important export sector for the Australian economy," he said.

However, he stopped short of speculating about whether health care would one day be the leading sector on the ASX.

'It is hard to keep medical breakthroughs in Australia'

While Australia's medical research and development is proving successful, keeping it here once it grows is not easy, as the Viralytics team would attest.

The University of Newcastle helped commercialise Viralytics, securing early investors and helping with the eventual sale of the company and its immunotherapy to MSD.

The university's senior deputy vice-chancellor, Kevin Hall, said keeping Professor Shafren's work in Australia was not really an option.

"The reality is, it was a great sale, but it's still going to need another $500 million to $1 billion to develop the drug so it's actually capable of going to market," Professor Hall said.

"That's where these big pharma companies come in.

"They've got the deep pockets to put that investment into the technology."

Kevin Hall and his team were instrumental in helping to sell Viralytics to pharmaceutical giant MSD. ( ABC News: Rachel Pupazzoni )

Professor Hall said he would like to see the Government make it easier for Australia's medical and biotech intellectual property to remain here.

"We punch well above our weight in terms of the discovery that we make," he told The Business.

"But it's that transition between the actual piece of knowledge and how it's ready for market — it consumes a lot of cash.

"The Government needs to incentivise some of the companies to come back into Australia, or for a large Australian company to be created that can actually take advantage of these discoveries we're making here."

Back at the ImmVirX lab, the team hopes to be at the clinical trial stage within the next two years.

It is likely that at that point, it will again need the might of big pharma.

"It's really hard to do it by ourselves," Professor Shafren said.

"Handing it off to a late-stage pharmaceutical company that has the skills to push it forward is the model for us at the moment."

"We're really proud that we're able to do this in Australia," he said, adding that if the big pharma industry was in Australia, he would be keen to see his discoveries stay on local soil.

"We'd be really open to having something here, so we'll see what happens in the future," he said.

You can find out more about this story on The Business tonight on ABC News Channel at 8:45pm (AEDT) or after the Late News on ABC TV.