FDA fast-tracks Bubs’ plan for US to equal its China sales in coming years

America’s Food and Drug Administration has extended Bubs’ temporary import approval by three years, providing it a pathway towards permanent market access.

Bubs executive chairman Dennis Lin says the company is in the US for the long-term.

Infant formula sales across Bubs’ fledgling North American business are set to equal its more established China division after the US regulator granted it a pathway to import products permanently, executive chairman Dennis Lin says.

The Food and Drug Administration has extended Bubs’ temporary import approval, which was set to expire next month, until October 2025.

Mr Lin said the agency had also provided the company with a “clear regulatory pathway” to achieve permanent market access during that time.

“We just need to do some studies in the background to comply with existing legislation and change the packaging from metric to imperial system,” Mr Lin said.

Mr Lin has been in America to shore up its US operations, which began in earnest at the start of the year before FDA accelerated the company’s growth, granting temporary import approval – what is known as enforcement discretion – in late May to help ease America’s chronic infant formula shortage.

“Our longstanding commitment to the US means we are ready to move expeditiously to complete the FDA process… as we continue to expand our US team and ramp up production.”

Bubs completed a capital raising worth $63m – or about 20 per cent of its then issued capital – in July to fund its US expansion and triple annual production at its Australian factory to 30 million tins.

Mr Lin said the company had ordered its additional manufacturing productions, with a team of engineers on standby to install the new equipment early next year.

“We’re basically trying to cut it to a six month time frame so we will have a shutdown, install and be ready to be up and running, so it will be a very quick process.”

The extra production capacity will allow Bubs to supply more US retailers, accelerating the company’s plans for America to match its China sales. Its English-label sales in China have rebounded after being hit by international border closures at the start of the pandemic, surging 179 per cent to $42m last year.

Mr Lin said the three-year enforcement discretion extension from the FDA meant US retailers had greater confidence in stocking Bubs products, with the company receiving more orders on top of the initial 1.25 million tins of formula it committed to the US.

“The retailers are going to be very confident that they are not dealing with someone who was merely here on a temporary basis.”

Kristy Carr, chief executive of Bubs Australia, and executive chairman Dennis Lin with boxes of Bubs baby formula being loaded into a cargo plane at Melbourne Airport in June. (Photo by Asanka Ratnayake/Getty Images)

Bubs founder and chief executive Kristy Carr said: “Given the overwhelming positive response that we have received from American parents, caregivers, healthcare professionals and retailers, we are pleased to be able to commit that Bubs Australia will remain in the US for the long term”.

“American parents who are already safely using Bubs infant formula products, as well as our retail partners now stocking our formula in 6500 stores across 42 states, can remain confident in ongoing supply, without interruption, providing more choices for American families seeking safe, clean nutrition for their children.

“Importantly, the FDA announcement also provides continued support for the ongoing expansion of our US distribution footprint, as we look forward to launching Bubs infant formula products in various new retail groups in the months ahead.”

Bubs’s products are stocked by the US biggest retailers, including Walmart, Kroger, Albertson Safeway, Target, Whole Foods, Buy Buy Baby, Meijer, Hy-Vee, Thrive.com and Amazon.com (Prime).

The company’s revenue surged 127 per cent to a record $89.3m in the year to June 30, thanks to a strong performance in the final quarter, with sales leaping from the Biden Administration’s ‘Operation Fly Formula’.

The increased sales of higher margin infant formula helped slash a loss from $74.8m to $11.4m. Meanwhile, gross margins jumped 32 per cent for the group, and 40 per cent for its goat milk-based infant formula.

But it is rapid US expansion is not coming at the expense of its China business. Last week Bubs said it will start manufacturing infant formula in China for the Chinese market – separating it from its Australian rivals – in what it describes as a “landmark deal” that will grant it greater access to a $40bn market.

After a year of negotiations, the company struck a joint venture with Chinese manufacturer Heilongjiang Ubeite Dairy Group (HUG), which will initially produce Chinese-label products across the Bubs goat milk range.

Chinese-label products are allowed to be sold in bricks-and – mortar outlets, such as mother baby stores, which represent 80 per cent of the country’s $40bn infant formula market.

This compares with English-label products – the category Bubs has serviced to date – which represent 20 per cent of the market, and are sold mainly on cross-border e-commerce channels and by resellers known as daigous.