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Reckitt’s share price plummeted as much as 20 per cent after a jury in the US awarded $60mn in damages to a mother who said her baby died after consuming the company’s Enfamil baby formula.
The London-listed consumer goods company’s share price dropped to its lowest level in a decade on Friday as investors absorbed the news.
Its shares closed down nearly 15 per cent in London trading after previously tumbling to 20 per cent below the previous day’s close.
The jury in an Illinois state court came to the conclusion that Enfamil, which is manufactured by Reckitt’s US infant formula business, Mead Johnson, had caused necrotising enterocolitis (NEC), a bowel disease, in Jasmine Watson’s infant son.
The jury awarded $25mn more than the sum sought by the plaintiff’s lawyers in the case.
“This verdict confirms what Mead Johnson has known for years: cow’s milk-based baby formula causes NEC in pre-term infants, often with fatal consequences,” said Ben Whiting, partner at Keller Postman, one of the firms that represented the mother.
Several hundred similar claims have been filed in state and federal courts across the US targeting Reckitt’s Mead Johnson and another baby formula maker, Abbott.
Roughly 450 of those cases have been grouped together in federal court for pre-trial purposes, and four have been selected as “bellwether” cases, but are still many months away from going to trial.
Reckitt has denied its products cause NEC, and said the allegations were not supported by science.
“While we continue to offer our deepest condolences to Ms Watson, we strongly disagree with the jury’s decision to fault Mead Johnson and award damages,” it said. “We will pursue all options to overturn the verdict.”
Reckitt’s $17bn acquisition of Mead Johnson in 2017 has been rocky. In 2020 the company, which also manufactures Dettol disinfectant and Nurofen pain killers, said it had recorded a £5bn writedown from the takeover.
However, the business made back some its losses when it boosted US sales during a national baby formula shortage, after competitor Abbott Laboratories closed a factory following reports of bacterial infections in babies.
Last year the US food and drug watchdog sent Mead Johnson and two other formula manufacturers warning letters over their baby formula manufacturing standards, after Reckitt was forced to recall several batches of formula because of the presence of harmful bacteria.