BELLEVILLE, Ill. – Reckitt Benckiser Group Plc, a UK consumer goods company, experienced a sharp decline in stock prices following a court ruling that awarded $60 million in damages to an Illinois woman. The jury determined that the company’s Enfamil baby formula played a role in the death of her premature baby. This case marks the first of its kind to proceed to trial in the United States.
The verdict caused a 15% drop in Reckitt Benckiser Group’s stock, resulting in the company’s lowest level in a decade. This decline wiped out approximately £5.4 billion ($6.9 billion) in market value. The jury in St. Clair County, Illinois, ruled in favor of the plaintiff, stating that Reckitt’s subsidiary, Mead Johnson Nutrition, failed to provide adequate warnings about the risks of necrotizing enterocolitis (NEC) associated with the Enfamil formula. NEC is a disease that primarily affects premature newborns and has a fatality rate of up to 40%.
Attorney Ashley Keller, representing the plaintiff, emphasized the significance of the jury’s decision. Keller argued that the verdict confirms that the formula significantly increases the risk of NEC. Furthermore, Keller predicts that this ruling is just the first of many, unless baby formula manufacturers take responsibility for their actions.
In response to the verdict, Reckitt Benckiser Group issued a statement defending the safety of their products and expressing their intention to appeal the decision. The company stands by the position that the plaintiff’s allegations lack support from scientific evidence and medical experts in the field.
Reckitt Benckiser Group, known for its well-known brands such as Nurofen, Durex, and Lysol, also manufactures infant nutrition products. They reported that their infant nutrition division, which includes the Nutramigen brand, holds a 45% share of hospital contracts in North America. However, investors are concerned about the potential consequences of this verdict due to previous experiences with drawn-out and costly product liability litigation in the United States.
The impact of the verdict extended beyond Reckitt Benckiser Group. Abbott Laboratories, another manufacturer of infant formula, experienced a decline of up to 5.5% in New York. Both Mead Johnson and Abbott face numerous lawsuits related to NEC risk, with over 400 cases consolidated before a federal judge in Chicago.
Legal experts suggest that these companies should consider establishing a compensation fund to address the growing number of cases. By proactively taking steps to address the issue, they can mitigate potential future losses. For Reckitt Benckiser Group, this verdict represents a significant setback following their acquisition of Mead Johnson in 2017 for $17 billion.
Despite the implications of the ruling, some analysts argue that the initial headlines may have painted a bleaker picture than the reality. Robbie Marcus, an analyst at JP Morgan, cited the companies’ belief that there is no scientifically proven causal connection between their products and NEC. Marcus also emphasized that these products continue to provide essential nutrition options for healthcare professionals.
Reckitt Benckiser Group’s decline in stock price emphasizes the potential financial impact of product liability lawsuits on companies. The outcome of this case has sparked concerns among investors and raised questions about the future of baby formula manufacturers facing similar litigation.