Abbott stock hit a one-month low Friday after an Illinois jury ordered a rival company, Reckitt Benckiser, to pay $60 million to the mother of an infant who died after being fed the company's baby formula.
The jury awarded the payout to Jasmine Watson after her son, Chance Dean, died following a case of necrotizing enterocolitis. The condition causes the death of bowel tissue and primarily affects babies born prematurely. Watson fed Reckitt Benckiser's formula, Enfamil, to her son Dean.
This is the first verdict out of hundreds of lawsuits claiming Reckitt Benckiser and Abbott Laboratories didn't warn parents of the heightened risk of necrotizing enterocolitis associated with baby formula compared to breast milk. Abbott makes Similac formula.
On the stock market today, Abbott stock toppled 2.8% to 115.49. At one point, shares hit their lowest point since Feb. 15.
A Buying Opportunity For Abbott Stock?
Evercore ISI analyst Vijay Kumar called the drop-off a buying opportunity for Abbott stock.
As of Jan. 31, there were 993 lawsuits pending in federal and state courts in which Abbott is a defendant, Kumar said. The company is sometimes listed as a co-defendant with Reckitt Benckiser's Mead Johnson division, which makes Enfamil.
Reckitt Benckiser says it's planning to "pursue all options to overturn the verdict."
"While we continue to offer our deepest condolences to Ms. Watson, we strongly disagree with the jury's decision to fault Mead Johnson and award damages," the company said in a statement. "We continue to believe that the allegations from the plaintiff's lawyers in this case were not supported by the science or experts in the medical community."
Abbott stock had been in a buy zone after breaking out of a cup-with-handle base with a buy point at 115.64, MarketSurge.com data shows. The downward move Friday sent shares below that entry and its 50-day moving average.
Abbott Could Settle The Cases
Evercore's Kumar said recent class action lawsuits involving Boston Scientific and Johnson & Johnson came out to settlements averaging $20,000 to $175,000 apiece. Based on that math, Abbott could face a $60 billion impact.
Historical examples, though, suggest an eventual settlement could be under $250 million, he said.
"Even at $1 billion and ignoring time value of money (payment spread over years), the $250 million equates to about 15 basis points of market cap," he said. "The current 5% (drop) seems egregious and represents a buying opportunity in our mind."
Kumar has an outperform rating and 120 price target on Abbott stock.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
