Abbott Labs falls after jury awards plaintiff $495M in damages in baby formula case

Update 8:10pm: Updates damage amount, adds Abbott comment.

Abbott Laboratories (NYSE:ABT) dropped 5% in after hours trading after a jury in St. Louis awarded a plaintiff $495 million in compensatory and punite damages over claims the company’s baby formula caused a potentially deadly bowel disease.

Illinois resident Margo Gill sued Abbott alleging that her premature baby girl developed necrotizing enterocolitis, or NEC, and suffered brain damage after being fed Abbott’s (ABT) Similac formula. The jury awarded $400 million in punitive damages and $95 million in compensatory damages, a court observer told Seeking Alpha as well as lawyers for the plaintiff said in a statement.

“We strongly disagree with the verdict, which was not unanimous, and continue to believe that Robynn’s condition is a tragedy for which no one is to blame,” Abbott said in a statement emailed to Seeking Alpha. “We will pursue all avenues to have the erroneous decision overturned.”

Abbott Labs (ABT) and competitor Reckitt Benckiser’s (OTCPK:RBGPF) Mead Johnson business are facing more than 1,000 lawsuits that allege that the companies failed to warn parents about the NEC risks with cow’s-milk-based products.

“Justice was served for Margo Gill and her daughter Robynn, who suffered severe, irreversible brain damage due to Abbott’s misconduct,” according to a statement from Tor Hoerman, attorney leading NEC formula cases against Abbott.

In the first case to go to trial in March, Reckitt Benckiser was ordered to pay $60 million in damages to a mother whose premature child died after consuming the company’s Enfamil baby formula. The verdict sent Reckitt Benkiser’s shares tumbling 15% on March 15, while Abbott shares dropped 2.8%. Abbott shares had fallen about 12% through Friday since the first jury verdict in mid March.

“There is no scientific evidence showing Abbott’s preterm infant products cause or contribute to causing NEC,” Abbott added in the statement. “Specialized formulas and fortifiers, like the one in this case, are part of the standard of care by the medical community and, along with mother’s milk and donor human milk, are the only available options to feed premature infants.

Importantly, this verdict, from this particular jurisdiction, has no bearing on any future case.”

Both Abbott and Mead Johnson are based in the Chicago area. Mead Johnson’s parent company, Reckitt Benckiser, is headquartered in the U.K.