Baby formula maker Care A2+ at risk of losing part of legal fight in stoush with US distributor

A Federal Court judge has warned baby formula maker Care A2+ it must pay security by an imminent deadline or risk its legal fight with a US distributor being thrown out.

Florida-based Gensco Pharma filed a case against baby formula manufacturer Care A2+ in Australia last year.

Baby formula manufacturer Care A2+ must lodge an initial $50,000 as security with the Federal Court by early March or its cross-claim against a US distributor and business partner will be dismissed, a judge has ruled.

Florida-based Gensco Pharmafiled a case against Care A2+ in Australia last year.

Gensco claimed it lost more than $200m in future profits after Care A2+ breached a deal to supply formula to the US market during a pandemic-era shortage. Gensco claimed Care A2+ had induced Gensco to enter an exclusive rights partnership even though Care A2+ could not deliver the product.

Care A2+ filed a cross-claim against Gensco Pharma and three executives, saying it was misled by claims about Gensco’s financial capacity to promote the sale of Care A2+ formula product in the US. Care A2+ Plus says it lost future profits of $358m as a result.

Justice John Halley on Monday ruled that Care A2+ must pay a total of $675,859.05 to the court as security amid concerns it could not afford an “adverse costs order” if it were to lose.

“In my view, Gensco has established that there is reason to believe that Care A2 may not be able to meet an adverse costs order,” Justice Halley said.

“The appointment of a receiver to Care A2 since 2 December 2022 provides a credible reason. The unexplained registration of security interests over the assets of Care A2, by GI 305 and Fishbank, at least as to the quantum of the amounts secured, provides further reason to believe that Care A2 may not be able to meet an adverse costs order.”

Justice Halley also said Gensco raised “serious and substantive concerns” about the ability of Care A2+ to meet any adverse costs order with respect to the cross-claim.

He ordered that an initial $50,000 be paid by February 19, followed by additional payments. If the first payment is not paid by March 7, the cross-claim will be dismissed.

The US suffered a shortage of formula in 2022 after the country’s biggest manufacturer, Abbott Laboratories, was forced to shut down its factory in Michigan in February and June. As a result, the US Food and Drug Administration granted come foreign companies import ­approval.

The business opportunity turned south for Care A2+ after Gensco launched a court case against the formula manufacturer in June, estimating it lost more than $200m in profits after Care A2+ allegedly supplied defective products, failed to comply with advertising requirements and falsely said its product was compliant with FDA requirements. Gensco Pharma also launched proceedings against Care A2+ directors.