A2 rallies on back of Bubs success

WASHINGTON: A2 Milk’s share price has been in the doldrums for months — until yesterday.

By early afternoon the stock was up 54c or 11.5% at $5.23 on higherthannormal volume. The reason?

US President Joe Biden said in a message on Twitter on Friday that 27.5 million bottles of formula were on their way to the United States from ASXlisted Bubs to help out with the formula shortage there.

When trade opened yesterday morning, Bubs’ share price rocketed up to A72c from A49c in response to the news.

A2 Milk — often seen as being in the same cohort as Bubs in as much as their product is outsourced — was caught up in the excitement.

‘‘Bubs is sending infant formula on a jet plane to the US to help out with the shortage,’’ Harbour Asset Management senior analyst Oyvinn Rimer said.

‘‘I think we are seeing a sympathy response in a2 Milk,’’ he said.

‘‘A2 Milk is piggybacking on that story.’’

The US infant formula industry is dominated by just four big players.

Last week, the US started taking product from Germany under the Biden administration’s Operation Fly Formula programme.

The US shortage has been exacerbated by the closure of formula maker Abbott Nutrition’s plant in February after the plant failed several inspections from the US Food and Drug Administration.

A2 Milk’s share price has in recent days had a $4 in front of it, sinking to $4.67 last week.

The share price peaked at $21.51 in July, 2020.

A2 Milk’s managing director and CEO David Bortolussi said a2 Milk had submitted an application to the US Food and Drug Administration (FDA) last week under the temporary enforcement discretion to supply infant milk formula.

He said a statement that a2 Milk was standing by to assist the US government, FDA and trade partners to help parents and caregivers gain access to infant formula, subject to stock availability.

‘‘We are able to provide support as one of the leading international infant milk brands, leveraging our existing US presence and distribution capability,’’ he said.

The company supplies its milk — which contains just the beta protein and not the combination of a1 and a2 contained in standard milk, to about 27,000 stores in the US.

The company’s share price has fallen after Covid19 disruption. —