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Billions of pounds were wiped from the value of Reckitt Benckiser after it was ordered to pay £50m to the mother of a premature baby who died after being fed its Enfamil baby formula.
Shares of the consumer goods giant, which also owns brands such as Nurofen, Dettol and Durex, fell 14.6 percent to their lowest level since 2014 following the ruling by an Illinois court.
This wiped £5bn off the value of the FTSE 100 company amid fears it could face a wave of costly Enfamil-related payouts.
A jury found that Mead Johnson, the Reckitt division responsible for baby formulas, was negligent and failed to warn about the risk of an intestinal disease known as necrotizing enterocolitis (NEC).
Following the decision, the company will have to pay £50 million, which includes compensation to Jasmine Watson, the baby’s mother.
Hit: A jury found Mead Johnson, the arm of Reckitt responsible for the baby formula, negligent and for failing to warn about the risk of intestinal disease known as necrotizing enterocolitis.
Mead Johnson has said he plans to appeal the decision. But Ben Whiting, a partner at Keller Postman, the law firm that represented the mother, said: “This verdict confirms what Mead Johnson has known for years: cow’s milk-based baby formula causes NEC in premature babies, often with fatal consequences. ‘
The verdict is the first trial of more than 400 lawsuits in the United States against Reckitt and its competitor Abbott, alleging they caused NEC with their formulas.
Susannah Streeter, chief money officer at broker Hargreaves Lansdown, said: “This decision comes at a bad time for Reckitt, which had already been struggling with falling volumes across its hygiene and homeware ranges.
“It is not simply the amount of this payment that has caused nervousness, but the fact that there are a long series of other claims pending, which could amount to an enormous sum for the company.”
The reputational damage caused by the lawsuit is problematic for the group, Streeter added.
The ruling comes less than a month after profits hit £2.5bn by 2023, down 22 per cent on the previous year.