Friday, March 29, 2024

A2 Milk sinks on FDA letdown

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Shares had jumped on hope green light could be imminent.
Bubs Australia scored a major win over A2 and Fonterra by filing its FDA application sooner. File photo
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A2 Milk sank 11% on news it won’t be sending infant formula to the lucrative US market any time soon.

According to the company, the US Food and Drug Administration (FDA) is deferring further consideration of the company’s request for enforcement discretion to import infant milk formula products into the US.

Last week, the company’s shares jumped on an Australian news report that approval might be imminent. While A2 Milk moved quickly to dampen those expectations, the shares remained elevated, peaking at $5.64 on Friday.

They recently traded at $5.01, down 11% in early NZX trading. 

“The company has also subsequently been advised by the International Dairy Foods Association that equivalent letters have been sent to all pending enforcement discretion applicants, indicating that the FDA is deferring any further review at this time of all pending applications,” A2 Milk said. 

In late May, the FDA announced “increased flexibilities” regarding infant formula imports as parents grappled with a nationwide shortage.

Late last week, BusinessDesk reported that Fonterra and A2 Milk were still awaiting a green light from the FDA, while Bubs Australia scored a major advantage by filing its application faster. 

The Australian company submitted its application nearly two weeks ahead of A2 and Fonterra.

Bubs more than doubled its full-year gross revenue to A$104.2m (NZ$115.2m) in 12 months to June 30 versus A$48.1m in the prior year and cites the US market as a key driver. 

Bubs sent 540,000 tins of infant formula into the US between May and July, and more are planned. 

Fonterra did not immediately respond to a request for comment.

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