On Monday, Abbott Laboratories (NYSE: ABT) shares fell nearly 7% premarket, while British peer Reckitt Benckiser slumped 9% after the U.S. healthcare firm was ordered to pay $495 million in damages related to its formula for premature infants.
A jury late on Friday found Abbott’s specialized formula for premature infants caused an Illinois girl to develop a dangerous bowel disease, a decision the company plans to appeal.
Close to 1,000 lawsuits have been filed against Abbott Labs, Reckitt, or both, in U.S. federal or state courts.
The $495 million verdict comes in much higher than investor expectations of between $60 and $100 million, J.P.Morgan analysts said.
“With a final settlement likely a ways away, we wouldn’t be surprised to see the verdict weigh on sentiment until there’s a clearer path forward for resolution of the matter,” the brokerage added.
The lawsuits claim the companies did not warn doctors that infants receiving formula have a greater risk of a deadly disease compared to infants who are breastfed or given donor milk or human milk-derived formula.
Abbott Laboratories (NYSE: ABT) and Reckitt have denied the claims.
“Verdicts like these, where the science and opinions of healthcare professionals who spend their lives treating these babies are ignored, make it difficult to continue supplying these products indefinitely,” an Abbott spokesperson said.
Abbott’s stock was down 6.9% at $98.32 before the bell. Reckitt fell 9.2% to 40.75 pounds per share, the lowest since January 2013.
Reckitt said it would “continue to vigorously defend” itself against the allegations, and added it stood behind the safety and efficacy of its preterm nutrition products.
Abbott’s forward price-to-earnings ratio last stood at 21.30, according to LSEG. Reckitt, in comparison, trades at 13.52 times its forward earnings estimates.
(Source: Reuters)
