The baby formula controversy at Abbott Laboratories (ABT) got exacerbated yet again after the Food and Drug Administration (FDA) revealed that it had initiated an investigation linked to the death of another infant who was given formula made by Abbott.
The infant, who died in January, was found with Cronobacter bacteria. However, the FDA was notified about the mishap on June 10. Furthermore, four babies who were reported ill after receiving Abbott formula also had cronobacter infections.
Turn of Events
In February 2022, Abbott recalled formula, including Similac, after four babies became ill following the consumption of its products, of which two infants died.
The company also shut down its plant at Sturgis, the company’s biggest formula factory, where the FDA found traces of the potentially deadly bacteria that caused illness in several infants.
However, then, the FDA couldn’t determine whether Abbott’s formula was the reason for the illnesses or deaths, as the strains of cronobacter found at the Sturgis plant did not match the strains from two available samples, which came from sick infants.
On June 5, Abbott restarted production at its Michigan baby formula plant, which was shut down again last week due to a flood situation that halted its infant formula production.
To date, the FDA has received 129 complaints linked to Abbott baby formula, including 119 since the product recall in February.
The FDA has previously reviewed nine complaints related to infant deaths, out of which only two were linked to its previous investigation of the Abbott Nutrition Sturgis plant.
FDA’s Stance
The FDA stated that the investigation is in its preliminary stages and the agency will provide an update “as it learns more.”
FDA Commissioner Robert M. Califf, M.D., commented, “The FDA is working night and day to ensure that parents and caregivers can readily find safe and nutritious formula products for any child who needs it.”
He further added, “I have personally spoken with infant formula manufacturers over the past several weeks and all have significantly increased their production efforts, which is resulting in more supply that will be available on stores shelves moving forward.”
Abbott’s Response
In response to the new complaint, Abbott said, “At this time, with the limited product and clinical information Abbott was provided to evaluate the case, there are no conclusions that can be drawn and no evidence to suggest a causal relationship between Abbott’s formulas and this reported case.”
Wall Street’s Take
Despite the controversy, the Wall Street community remains optimistic about the stock with a Strong Buy consensus rating based on eight Buys and a Hold. The average Abbott price target of $140 implies upside potential of 32.78%.
Conclusion
There seems to be growing unrest as the controversy surrounding Abbot’s formula continues to get messier.
Shares of Abbott have lost almost one-fourth of their market capitalization ever since the baby formula controversy became public and may possibly lose more if the issues don’t subside.
