Bubs Australia (ASX: BUB) wins permanent US FDA approval as shares jump 35%

Bubs Australia Limited (ASX: BUB) has secured permanent regulatory authorisation from the U.S. Food and Drug Administration (FDA) for three infant formula products, removing one of the biggest uncertainties surrounding a U.S. business that generated A$65.8 million of revenue in FY26 and now represents almost 59% of group sales.

The FDA authorisation covers Bubs Goat Infant Formula, Bubs 365 Day Grass Fed Infant Formula and Bubs Essential Infant Formula. All three products are now listed among non-exempt infant formulas marketed in the United States, establishing a permanent regulatory pathway rather than relying on the enforcement-discretion framework that allowed Bubs to enter the market during the U.S. infant-formula shortage.

Bubs said the approval confirms that its products, manufacturing systems and supporting scientific evidence satisfy applicable U.S. requirements for safety, nutritional adequacy and quality. The company also said it is evaluating participation in the U.S. private-label infant-nutrition market, although any such expansion would require additional regulatory, technical and commercial work and should not be treated as a committed revenue stream.

Investors reacted sharply. Bubs shares closed September 7 at A$0.135, up 35% from A$0.10, after reaching A$0.145 during the session. The stock traded more than nine million shares and briefly climbed about 45% intraday, its strongest one-day move in several years.

Why is permanent FDA authorisation materially different from Bubs’ previous US market access?

Bubs did not enter the United States through the conventional long-term approval process.

During the 2022 U.S. infant-formula shortage, the FDA introduced an enforcement-discretion framework that allowed selected overseas manufacturers to supply the market while progressing toward full compliance with U.S. infant-formula requirements. Bubs became one of those manufacturers and subsequently participated in the FDA’s transition plan for permanent market access.

The company submitted New Infant Formula Submissions for Bubs Essential, Bubs 365 Day Grass Fed and Bubs Goat. As recently as December 2025, those submissions were still under FDA review, with Bubs operating under continued enforcement discretion while the regulator completed its assessment.

That created an unusual commercial position. Bubs had already built substantial U.S. distribution and consumer demand, but the long-term regulatory foundation supporting those sales was still being finalised.

September 7 changes that position. The company is no longer dependent on temporary enforcement discretion for these three products. Permanent authorisation removes a regulatory overhang from a market that has become Bubs’ largest source of revenue.

The significance is therefore much greater than simply adding another approval to the corporate timeline. The FDA has effectively converted a business established during an emergency supply response into a permanently authorised U.S. franchise.

How important has the United States already become to Bubs Australia’s revenue?

Bubs reported FY26 group revenue of A$111.9 million, up 9.2% from A$102.5 million in FY25.

United States revenue reached approximately A$65.8 million, representing about 58.8% of total group revenue. The U.S. business increased approximately 24% year over year and expanded distribution beyond 10,000 stores across formats including major retailers and e-commerce channels.

That means permanent FDA authorisation protects the regulatory foundation beneath well over half of Bubs’ existing revenue rather than merely supporting a future market-entry plan.

The shift has also reduced the company’s historical dependence on China. Bubs once attracted investor attention primarily through its China-facing infant-nutrition strategy, but the United States has become the clear growth engine as distribution has broadened and goat-milk formula has gained traction.

Bubs’ FY25 U.S. revenue was approximately A$53.1 million. Moving to A$65.8 million in FY26 represents growth of roughly 24%, while the United States increased its share of the overall business as other markets grew more slowly.

The commercial question now changes. Investors no longer need to focus primarily on whether Bubs will retain U.S. access. They can focus more directly on how much larger the U.S. franchise can become under a permanent regulatory structure.

Why did Bubs still report a statutory EBITDA loss despite record US sales?

Revenue growth has not yet translated cleanly into reported profitability.

Bubs reported an underlying FY26 EBITDA of approximately A$5.3 million, up sharply from the previous year, but statutory EBITDA remained negative at approximately A$1.8 million. Gross profit fell around 9.4% to A$44.5 million even though group revenue increased, while gross margin contracted from 47.8% to 39.8%.

The margin compression reflected several unusual costs associated with building the U.S. business, including air freight, tariffs, regulatory expenditure and inventory-related charges.

That creates an important financial consequence from permanent FDA authorisation.

Some of the regulatory uncertainty and transitional supply-chain inefficiency associated with entering the U.S. market should become easier to manage once Bubs is operating on a permanent footing. Management has already indicated that it expects stronger FY27 margins as temporary air-freight and inventory pressures normalise.

The FDA decision does not itself guarantee higher margins. U.S. infant formula remains highly competitive, distribution and marketing costs remain substantial, and tariff or manufacturing changes can affect profitability.

But Bubs is now investing behind a permanently authorised U.S. franchise rather than spending to support a market position whose long-term regulatory status remained unresolved.

Could private-label infant formula become Bubs’ next major US growth opportunity?

Bubs said the FDA decision creates strategic optionality to investigate the U.S. private-label infant-nutrition segment.

That could matter because permanent regulatory authorisation demonstrates that the company has products, manufacturing processes and scientific documentation capable of meeting U.S. requirements. The same manufacturing capabilities may potentially support products sold under retailer or partner brands if additional approvals and commercial arrangements are secured.

Private label can offer attractive manufacturing volumes because retailers increasingly seek alternative suppliers to diversify infant-formula supply chains. The U.S. market remains concentrated among a relatively small number of manufacturers, and the 2022 shortage highlighted the risks created by excessive dependence on a narrow production base.

Bubs should not yet be valued as though private-label contracts exist. No customer, volume commitment, contract value or launch timetable has been disclosed.

The opportunity is more strategic than financial at this stage.

Permanent FDA approval widens the set of conversations Bubs can have with American retailers and nutrition companies. Whether that turns into meaningful incremental revenue will depend on contract wins, manufacturing economics and additional regulatory requirements.

How much does permanent US access reduce the strategic risk around Bubs’ manufacturing base?

Infant formula is one of the most heavily regulated consumer food categories because products serve infants as their primary or sole source of nutrition.

That makes regulatory approval much more valuable than a conventional consumer-product listing.

Bubs operates its manufacturing supply chain around Australian dairy inputs and specialised infant-formula production. Permanent U.S. authorisation means the company can plan manufacturing, inventory and retailer commitments with greater confidence that its core products will remain eligible for sale in its largest market.

That can improve capital planning as well.

Under temporary access, management needed to balance the commercial attractiveness of building U.S. inventory against the possibility that a prolonged regulatory review could disrupt the market. A permanent pathway reduces that binary regulatory risk, although normal compliance, inspection and quality-control obligations remain.

It could also improve Bubs’ negotiating position with retailers. A supplier with permanent regulatory status can make longer-term distribution and promotional commitments more credibly than a company dependent on temporary enforcement discretion.

Why did Bubs shares jump 35% when US sales were already growing before the FDA decision?

The market already knew that Bubs was selling significant volumes in the United States.

What it did not know with certainty was when the regulatory transition would be completed.

Bubs shares had closed at A$0.10 on September 4 after entering a trading halt ahead of the announcement. On September 7, the stock opened at A$0.135, traded as high as A$0.145 and closed at A$0.135, producing a 35% gain.

The share price remained below its 52-week high of approximately A$0.165, but the approval reversed much of the weakness that followed the FY26 results.

That reaction indicates investors assigned significant value to eliminating regulatory uncertainty around the company’s largest market.

There is also an earnings angle. Bubs’ FY26 results showed that U.S. revenue growth alone is not enough if gross margins remain under pressure. The next stage of the re-rating therefore depends on whether permanent authorisation helps Bubs convert its A$65.8 million U.S. franchise into stronger operating profit.

The most revealing figures in the next results will consequently be U.S. revenue growth, gross margin and statutory EBITDA rather than the number of stores carrying the brand.

Permanent FDA approval establishes that Bubs can remain in the U.S. market. FY27 will begin to show how profitable that position can become.