Shares in Reckitt Benckiser Group PLC jumped on Friday after its infant formula business Mead Johnson won a key legal case in the US.
On Thursday, Abbott Laboratories and Mead Johnson were cleared by a US jury over claims they hid risks their premature-infant formulas can cause a bowel disease that severely sickened a baby boy. It was the companies’ first trial win in litigation over the products.
The latest trial consisted of more than 1,000 lawsuits alleging the formulas can cause necrotizing enterocolitis, a bowel ailment that has been linked to deaths and brain damage. In July, another jury in St Louis held the companies liable in separate trials, including a nearly $500 million verdict against Abbott.
The ruling in the Whitfield case in the Missouri State Court was welcomed by Mead Johnson.
‘It demonstrates that the claims in this case were not supported by the science or experts in the medical community, and this case, like all the others brought by the plaintiff’s bar, should be dismissed. This outcome illustrates that moving forward, plaintiffs face significant challenges due to the heavy burden they must meet in proving elements of their claims in every single case,’ the company said in a statement.
In response, shares in Reckitt Benckiser soared 9.8% to 5,144.20 pence each in London early Friday. Reckitt was the best performing stock in the FTSE 100 index which was up 0.2%. Abbott Laboratories rose 5.8% in the after-hours trading session in New York on Thursday and was up 5.0% in the pre-market early Friday.
‘Today’s verdict is consistent with the scientific consensus that there is no established causal link between the use of specialized preterm hospital nutrition products and NEC, and that where human milk is unavailable or when supplementation is necessary, specialized preterm hospital nutrition products can provide essential, lifesaving nutrition,’ Mead Johnson said.
Mead Johnson said it will continue to ‘vigorously defend ourselves against all other cases in the interest of safeguarding the health of premature babies’.
The $17 billion acquisition of Mead Johnson in 2017 has been an unhappy one for Reckitt. Back in 2020, it took a £5.04 billion impairment on goodwill in the business. In 2021, it sold its infant nutrition business in China for $2.2 billion. This year, in March, a jury in the US awarded $60 million in damages to a mother who said her baby died after consuming Mead Johnson’s Enfamil baby formula.
In July, Reckitt announced plans to streamline its business, which could see the sale Mead Johnson. Bloomberg said Goldman Sachs Group Inc had been engaged to help Reckitt evaluate options for the business.
Analysts at RBC Capital Markets commented: ‘We don’t pretend to be experts on US litigation, but this feels like a big deal to us, putting a spoke in the wheels of what has hitherto been an unremittingly adverse narrative.’
‘This is the third such case - the first was against Reckitt, the second Abbott, and this one both - and we don’t yet know the full reasons for the jury’s decision, but having lost the first two this feels to us like a significant reversal in fortune.’
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