Mead Johnson Drops as Wal-Mart Pulls Formula After Death
(Updates with comment from analyst in fifth paragraph.)
Dec. 22 (Bloomberg) -- Mead Johnson Nutrition Co., maker of the Enfamil baby formula, had a record plunge after Wal-Mart Stores Inc. pulled a batch of the product after an infant given the formula died from a bacterial infection.
Mead Johnson fell 7.6 percent to $70.64 at 12:40 p.m. New York time, after declining to $67 in the biggest drop since February 2009, when the Glenview, Illinois-based company’s shares were first publicly traded.
The baby, in Lebanon, Missouri, tested positive for Cronobacter, a microorganism found in the environment that can cause serious illnesses in newborns, wrote Chris Perille, a spokesman for Mead Johnson, in an e-mailed statement today. The batch used by the child’s family tested negative when it was produced and packaged, and the results were reconfirmed after the news, he wrote.
“The family purchased the formula at a Wal-Mart store, and ‘out of an abundance of caution’ Wal-Mart decided to voluntarily ‘pull & hold’ the same size cans (12.5 oz.) of Enfamil Newborn from the same batch code until the investigation is completed,” Perille said.
Possible Sources
Health officials will examine a range of possible sources of the bacteria, including the formula consumed and the water used to prepare it, Perille said.
“Outbreaks of this particular bacteria are typically linked to powdered infant formula, but it is unclear at this point where along the chain the contamination occurred or if the formula is the cause altogether,” Edward Aaron, an analyst with RBC Capital Markets in Denver, wrote in a research note today. He said he expected an investigation to be completed in a matter of days. Aaron has an “outperform” rating on Mead Johnson.
Wal-Mart, based in Bentonville, Arkansas, learned of the death Dec. 18, said Dianna Gee, a spokeswoman for the world’s biggest retailer. The company immediately removed the product from the Lebanon store and the next day notified more than 3,000 stores in 49 states. Wal-Mart has had “nearly 100 percent compliance” from its stores, she said.
“Since we knew there was an active investigation by the Missouri Department of Health, we decided it was best to pull the product until the investigation is complete,” Gee wrote in an e-mail. “The products could be returned at a later date.”
Customers can return the formula for a full refund or exchange, Gee said. Neither Wal-Mart nor Mead Johnson provided the number of cans pulled from shelves. Perille said the number is in the thousands, and that about half of Wal-Mart’s stores carry the formula. The retailer had 3,856 stores in the U.S. as of Nov. 30, according to Wal-Mart’s website.
Mead Johnson Sales
The Enfa brands, which include Enfamil, accounted for 79 percent of Mead Johnson’s $3.14 billion in 2010 revenue, and were the world’s lead brand franchise in pediatric nutrition based on retail sales, the company said in a February filing. About 12 percent of Mead Johnson’s sales come from Wal-Mart, according to data compiled by Bloomberg.
About 45 percent of babies in the U.S. are breastfed exclusively for the first three months of their lives, according to a 2011 report from the Centers for Disease Control and Prevention.
Several cases of foodborne illness from infant formula are reported each year to the CDC, Lola Scott Russell, a spokeswoman, said in an e-mail. The type of bacteria, Cronobacter, is part of a family called Enterobacter sakazakii that has a fatality rate of 40 percent to 80 percent in infants, according to Marler Clark, a Seattle-based law firm that focuses on foodborne illness litigation.
Last year, Abbott Laboratories recalled Similac-brand powder infant formulas distributed in the U.S., Puerto Rico, Guam and some Caribbean nations because of possible insect contamination.
--With assistance from Michelle Fay Cortez in Minneapolis and Stephanie Armour in Washington. Editors: Bruce Rule, Adriel Bettelheim
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