Abbott Weighs Pulling Premature-Baby Formula Cited in Suits

Abbott Laboratories is considering pulling infant formula for premature babies off the market, Chief Executive Officer Robert Ford said, amid investor concerns about lawsuits over its safety.

The fortified formula, designed for fragile infants under medical supervision, has drawn fire amid claims the company didn’t properly warn parents about its dangers. At a trial this month in Missouri, Abbott was accused of failing to disclose that the product, Similac Special Care, could increase the risk of potentially deadly intestinal damage.

Reckitt Benckiser Group Plc, the maker of best-selling formula Enfamil, lost a similar case in March, with the jury awarding a mother $60 million in damages following the death of her premature baby.

Read more: Reckitt Loses $7 Billion Market Value After Formula Verdict

The specialty products generate sales of just $9 million annually for Abbott, Ford told investors on a call Thursday after the company’s release of second-quarter earnings.

‘Take Action’

“The decision to pull a product is not an easy one,” Ford said on the call. But if doctors’ need for Similac Special Care gets lost in the litigation, “then yeah, we have to think about at least what is the implication of removing a product,” he said.

He called on public health officials and others concerned about premature babies to “take action,” though he didn’t specify what could be done.

“Plaintiff lawyers are advancing a theory that is without merit or scientific support,” Ford said. “If these products were no longer available, physicians would be deprived of a vital food that is needed” in the neonatal intensive care unit.

The company declined to answer additional questions or make Ford available. In an interview with CNBC after the investor call, Ford said he was “hopeful” he won’t have to pull the product.

1,000 Lawsuits

Abbott and Reckitt are facing more than 1,000 suits in US courts that the cow’s-milk-based products could increase the risk of necrotizing enterocolitis, destruction of the intestines that can be deadly for premature infants. Bloomberg Intelligence expects about 3,000 cases to be filed, with manufacturers facing as much as $1.5 billion in potential exposure.

The lawsuits have been weighing on Abbott’s shares, which have fallen 16% since the day before the Reckitt verdict. The shares closed down 4.4% to $100.07 on Thursday, after the company reported second-quarter earnings that beat estimates and raised its full-year guidance.

“Instead of fearmongering in front of their shareholders, they should be directly addressing the parents of premature babies whose lives have been forever changed due to the dangers of their cow’s-milk formula,” Tor Hoerman, one of the lawyers representing the families, said in an emailed statement. “Abbott should use its ample resources to make sure the parents of certain preterm babies understand the risks of serious injury or death associated with their products.”

Pulling the products could worsen the company’s standing in the current court cases, though it could limit the long-term liability by averting future lawsuits, according to lawyers who aren’t involved in the litigation.

“I don’t see the downside of them pulling this product off the market, especially if it’s only generating $9 million a year in sales,” said Carl Tobias, a University of Richmond professor who teaches mass-tort law. “It would put a fence around the litigation, and every company who faces mass-tort liability wants that.”

It also makes a settlement more feasible, said Lynn Baker, a University of Texas professor who teaches product liability law. The company will know how many suits are in the litigation’s universe and have a better chance to resolve them all, Baker said.

Risk to Premature Babies

Premature babies are at highest risk of developing the life-threatening intestinal illness that occur when tissue in the colon becomes inflamed and starts to die. Doctors aren’t sure what causes the condition, which makes prevention difficult.

“Abbott can point to multiple medical problems the plaintiff had that were risk factors for her injury,” Bloomberg Intelligence analyst Holly Froum said of the Missouri case in a note. “It should arguably be an easier case than others for Abbott to win.”

But if Abbott loses the case, it could signal trouble for future trials, Froum said.

The jury’s verdict could come by early August.

The case on trial is Gill v. Abbott, 2322-CC01251, Missouri 22nd Judicial Circuit (St. Louis).