Consumer goods giant Reckitt has suffered a £7bn share price slump after it lost a US legal case claiming its baby formula contributed to the death of a premature child.
London-listed Reckitt’s share price plunged by the most in two decades and to its lowest point in more than a decade after an Illinois jury ruled Reckitt had failed to warn about the risks of necrotising enterocolitis (NEC) from its milk-based Enfamil brand products.
NEC is an illness that damages the stomach and tends to affect premature babies. Reckitt’s US subsidiary Mead Johnson Nutrition had been sued by Jasmine Watson, who claimed the baby formula caused the death of her premature baby.
FTSE 100-constituent Reckitt has now been ordered to pay Ms Watson $60m (£47m) after losing the case.
Ashley Keller, a lawyer for Ms Watson, said: “The jury’s finding confirms what Mead Johnson folks already knew – that its formula dramatically increases the NEC risk “This is the first verdict in the US, but won’t be the last, unless baby formula makers accept responsibility for their misdeeds.”
News of the decision sparked a near 20pc plunge in Reckitt’s share price, wiping around £7.3bn ($9.3bn) from its market value.
It comes amid hundreds of US lawsuits against formula makers over NEC. The Illinois case was the first to go to a jury trial.
Shares in Abbott Laboratories, another formula maker facing legal claims, fell almost 5pc. Jurors took less than two hours to decide that Mead Johnson should pay $60m in compensatory damages. Mr Keller said: “We only asked for $25m, but the jury came back with more than double that.”
More than 400 suits targeting Mead Johnson and Abbott are consolidated before a federal judge in Chicago for pre-trial information exchanges. The judge hasn’t yet scheduled a trial. Thousands of other suits are pending in state courts, Mr Keller said. Reckitt continues to insist its products are safe and not linked to NEC. It has vowed to appeal the Illinois case.
NEC has a fatality rate of as much as 40pc. It is a major cause of death among premature babies, though rarely occurs in full-term babies.
The disease, which affects intestinal tissues, can be hard to diagnose. According to the NHS, symptoms can include general signs of illness, problems feeding or vomiting, and a swollen and tender abdomen.
While it has a high fatality rate, it can be treated with intravenous feeding and antibiotics. In some cases it can require surgery.
Reckitt said in a stock market update that it stands by the safety of its products and “strongly rejects any assertion that any of our products cause NEC”.
The company added: “It is important to note that this is a single verdict in a single case and should not be extrapolated.
“This case, and others like it, exclusively involve products used under the strict supervision of neonatologists in neonatal intensive care units and provide lifesaving nutrition options for vulnerable premature infants.
“We are, of course, surprised and deeply disappointed with the verdict and will pursue all options to have it overturned.”
Reckitt is one of the world’s largest consumer goods companies, pulling in revenues of £14.6bn in 2023. As well as Enfamil, it makes products such as Durex condoms, Cillit Bang cleaning fluid and Gaviscon.
Nutrition brands account for about 16pc of its sales, contributing £2.4bn to its turnover last year.
News of the Illinois jury’s decision marks the latest in a series of blows for the company, which last month revealed a £55m hit to revenues caused by an accounting controversy in the Middle East.
Kris Licht, chief executive at Reckitt, said the company had unearthed “some commercial practices that we weren’t particularly pleased with”, leading to the dismissal of a number of employees.
Reckitt in January recalled two baby formula products from sale in the UK amid concerns they could contain dangerous bacteria, in an event unrelated to the case in the US.
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