Yes, it's art
Back when I lived in Minneapolis, I was heavily immersed in the world of visual art simply through association with buddies who were trying to break into the local scene. I attended so many gallery openings that I learned the rhythms, the accepted behavior, etc. and of course I saw a lot of art. (Or attempts thereof.)
As with all the arts, there is necessarily a lot of chaff amongst the few grains of wheat, so I considered a showing successful if I liked even one piece.
(Not counting naked pictures, by the way. A work containing a nude is a gimme because we all find the human body intrinsically interesting, so art depicting the same is automatically interesting just because of that. That didn't disqualify a piece from being something of true imagination and quality, it still had to pass the personal test of like it/hate it. To be honest, though, I can remember only a couple times where a nude was interesting beyond nakedness.)
Nonetheless, to this day if you put a gallery somewhere on my path, I will wander through it.
Had I encountered this during a show, I would have loved it.
But is it art?
This is essentially what all special effects houses do for a living. I'm impressed that Patricia Piccinini went the gallery route rather than the Industrial Light and Magic route, simply because it's a great way to stand out and be unique. But now that she's done it, it's done for good. If other artists started offering sci-fi creature statues, it would now be passé.
So, yeah, it's art. But I think getting this stuff into galleries in the first place is the larger accomplishment.