The A2 Milk Company Ltd (ASX: A2M) share price is down 9% on some frustrating infant formula news from the US FDA.
A2 Milk is one of the largest infant formula businesses from the Australian and New Zealand markets.
A2 Milk share price drops on US FDA
What could cause such a big drop?
Investors had been expecting an imminent announcement that A2 Milk would be able to start selling infant formula into the US market to help with the infant formula shortage in the country.
In an announcement to the ASX, A2 Milk said that earlier today it had received a notification from the US Food and Drug Administration.
That notification said that, at this time, the FDA is “deferring further consideration of the company’s request for enforcement discretion to important infant milk formula products into the US.” In other words, A2 Milk is not going to receive approval shortly.
A2 Milk also told investors that it has subsequently been advised by the International Dairy Foods Association (IDFA) that equivalent letters have been sent to all pending enforcement discretion applicants. A2 Milk said this indicates that the FDA is deferring any further review at this time of all pending applications.
What now?
The question is – how permanent is this deferral? Will A2 Milk get a chance later this year? Or has it missed the boat? Considering the size of the fall today, it doesn’t seem that investors are expecting the FDA to give approval next week.
It’s not as though this changes anything for A2 Milk. It’s in the same position it was before the US situation. But, investors were expecting approval, which is why the A2 Milk share price is back down to where it was at the end of July.
Even after this decline, the A2 Milk share price is up more than 4% over the last month. So, it’s just short-term volatility.
The A2 Milk share price is still down 15% in 2022, and down much more over a longer time period. Considering the success of Bubs Australia Ltd (ASX: BUB) at entering the US infant formula market, I would rather own shares of Bubs.
