a2 Milk Company (NZX:ATM) gets FDA nod to supply infant milk formula in US

Follow us on Google News:
 a2 Milk Company (NZX:ATM) gets FDA nod to supply infant milk formula in US
Image source: © Mehaniq | Megapixl.com

Highlights

  • A2 Milk company gets FDA approval to sell its infant milk formula in the United States.
  • This decision has come after the FDA once deferred its entry in August.
  • ATM shares jumped almost 8% today (3 November).

In an announcement on the NZX today (3 November 2022), New Zealand’s milk and infant formula company a2 Milk Company (NZX:ATM) revealed that it had received confirmation from the US Food and Drug Administration (FDA) that it could sell and distribute its a2 infant milk formula in the United States.

Accordingly, on the news, a2 Milk’s shares jumped 7.48% to NZ$6.18 today (3 November).

As per the update, the FDA has been allowing products made overseas to enter the highly controlled US infant formula market due to a shortage of infant formula in the US.

a2 Milk said that the FDA's move presented an opportunity for the company  to develop its brand in the infant milk category over the long term.

It may be recalled that in August 2022, the FDA had deferred a2 Milk’s request to sell products in the US.

The FDA has allowed a2 Milk’s Platinum infant formula for babies up to six months old and the a2 Platinum follow-on formula for babies 6–12 months old.  The update revealed that these products would be sold at major US retail stores. 

 Sales predictions

According to the company, it is difficult to predict the sales potential of this formula in the US market. In the near term, sales in 2023 are expected to be about 1 million cans, primarily in the second half of 2023. However, the actual sales would depend on customer demand, consumer offtake, and supply shortages over a period of time added the company’s announcement.

In terms of impact on earnings, the company expects this move to be incrementally beneficial, the gross margins to be lower than average, and distribution costs to increase.

David Bortolussi, the CEO and managing director of a2 Milk, said that the company was very pleased with the FDA announcement.

He stated that the company would be increasing its supply to respond to the situation, while continuing to supply to its trading partners in China and other markets, including the domestic market.

Renewal of contract with China’s State Farm

On 3 October 2022, a2 Milk renewed its exclusive import and distribution arrangements with China State Farm Agribusiness Holding Shanghai Co (CSFA).  The import agreement was extended for five years. CSFA has been a distribution partner of a2 Milk Company for over nine years. This extension was important for strengthening its business in China, said a2 Milk’s CEO

 

Disclaimer

The content on this website, including, but not limited to, any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (“Content”) is a service provided by Kalkine Media New Zealand Limited (Kalkine Media, we or us) and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide financial advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests users seek financial advice from a financial advice provider, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all liability to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without any express or implied warranties of any kind. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit a source wherever it is indicated or is found to be necessary or desirable.

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK