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Why Wattle Health Australia Ltd shares rocketed 22% higher today

One of the best performers in morning trade has been the Wattle Health Australia Ltd (ASX: WHA) share price.

The infant formula and baby food company’s shares rose almost 22% in early trade before giving back some of these gains.

At the time of writing Wattle Health’s shares are up 11% to $1.72.

Why are they higher?

This morning the company announced that it has secured a distribution agreement with Australian Pharmaceutical Industries Ltd (ASX: API) for its infant formula product.

According to the release, Wattle Health’s product will be made available to API’s Priceline pharmacy chain and to other pharmacies through its wholesale distribution business.

Management believes this arrangement will not only increase its brand awareness and sales, but also the credibility of the Wattle Health brand. This is seen as a vitally important step as it continues to grow its distribution footprint both domestically and internationally in the China market.

Should you invest?

While I do think that Wattle Health could have a bright future ahead of it, I would suggest investors wait to see how this distribution deal impacts its sales.

After all, at this stage it is unknown how many Priceline pharmacies will decide to stock the Wattle Health infant formula product. The company will be fighting for shelf space with the likes of Nestle and Aptamil.

But having said that, I’ll be watching on with a keen interest in 2018.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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