Investing.com - Reckitt Benckiser (LON:RKT) stock retreated Friday amid uncertainty over its liabilities surrounding its Mead Johnson infant-formula business.
At 06:55 ET (10:55 GMT), Reckitt stock dropped almost 5% to £49.80, down over 7% over the course of a week.
Reckitt acquired Mead Johnson in 2017 for $17.9 billion, and faces ongoing litigation in the U.S. related to the alleged health risks to babies from consuming its Enfamil Premature 24 infant formula.
In March 2024, a U.S. court in Illinois awarded $60 million in damages to a mother of a baby that died from necrotizing enterocolitis (NEC) after being fed Enfamil Premature 24, with the judge ruling Mead Johnson was “negligent”.
Additionally, a judge has ordered a retrial in the another case (originally won by Reckitt’s Mead Johnson and its fellow IMF producer Abbott Laboratories (NYSE:ABT)), and this reintroduces uncertainty to a process that had seemed to be going Reckitt’s way, according to analysts at RBC Capital Markets, in a note dated March 14.
“We believe Reckitt’s share price weakness this morning reflects investors’ concerns around NEC litigation in general, and the Whitfield case in particular,” said RBC Capital Markets.
“It is easy to dismiss this as noise, inevitable in a U.S. litigation battle. However, we felt that it was significant when Abbott won this case; by extension, it feels that seeing the jury’s verdict overturned is – the removal of a positive, if you like – feels similarly significant,” added RBC Capital Markets.
As a reminder, we assume £2 billion all-in liability in relation to the NEC claims for Reckitt, which we believe is compared to market expectations in the range of £1-5 billion.
RBC maintains an “outperform” rating on Reckitt, with a £60 price target.