Organic baby food maker Bubs Australia Ltd (ASX:BUB) saw significant investor interest after announcing a supply agreement with Costco Wholesale Corporation. Costco will “range Bubs infant formula products in its wholesale catalogue nationally, and display ranging in Costco’s Auburn warehouse”. This was preceded by another major announcement last month: BUBS got access to 5,000 pharmacies across the country by adding “key pharmacy wholesalers Sigma Pharmaceuticals and Symbion In New South Wales and Western Australia”. In addition, supermarket behemoth Coles decided to sell BUB’s goat milk formula in more than 450 stores, compared to nearly 320 earlier, while most of Coles stores already sell Bubs organic baby food.
Agreement with Costco is a big win for the company that launched IPO this Janaury as Costco’s eight warehouses in the country have nearly 150,000 wholesale members, who are resellers, including personal shoppers catering to domestic and international customers, a key demand driver for infant formula products in Australia.
The company’s other distribution channels include brands such as Discount Drug Stores and Chemist Warehouse. While the infant formula market is highly competitive with competitive and bigger companies such as a2 Milk and Bellamy’s Australia, BUB’s increasing footprint indicates that it’s definitely attracting consumers’ interest.
Mayne Pharma Group Ltd (ASX:MYX): investors sense more trouble
Shares of the Australia-based branded and generic products manufacturer have been under pressure since December 2016, when the company was subpoenaed by the US Department of Justice through the latter’s Antitrust Division, which has alleged Mayne’s involvement in artificially propping up prices of two generic drugs, along with other big generic names such as Mylan NV and Teva Pharmaceuticals.
Mayne acquired a portfolio of Teva’s generic products last year in a deal worth more than US$650 million. The acquisition helped Mayne deliver over 200% growth in core earnings (EBITDA) in the most recent half-year, despite losing exclusivity on its heavyweight drug Doryx—antibiotic used in the treatment of acne, chlamydia infections and bacterial pneumonia.
Mayne shares are down nearly 35% from their 52-week highs after another 2% drop this Wednesday. On Tuesday, US president Donald Trump’s tweet on bringing down drug prices had triggered selling in the US healthcare sector stocks. Another news that investors saw as a warning signal was the Mar. 8 ASX notification that company director Bruce Mathieson disposed 600,000 MYX shares. In contrast, the company has seen significant net insider buying over the past six months.