Synutra Plunges Most Since 2008 in U.S. on Report of Unsafe Baby Formula

Synutra International Inc., a Chinese maker of baby formula, fell the most since 2008 after a newspaper reported its products may be linked to premature development in infants. The company denied the report.

Synutra tumbled 27 percent to $12.72 at 4 p.m. in Nasdaq trading, the most since September 2008. The stock had the biggest drop among the companies in the Russell 2000 Index.

Medical examinations of three girls in the city of Wuhan between the ages of four months and 15 months found the level of the hormone estradiol in their bodies was as much as some adult women, the Health Times newspaper reported Aug. 5. The girls had consumed the same baby formula, the newspaper reported, without identifying the producer. The Oriental Morning Post reported Aug. 7 that all three of the infants were fed baby formula produced by Synutra.

Synutra said it’s may take legal action to “protect our brand” and prosecute those responsible for the allegations, according to statement issued today via PR Newswire.

“We are completely confident that our products are safe and our quality levels are industry-leading,” said Liang Zhang, chairman and chief executive officer of Synutra. “We have participated in exhaustive quality testing at all required government levels, including with the relevant state agencies and industry groups.”

Synutra has worked with state authorities to test product samples to prove their safety, the statement said, and expects the results of the test to be made public soon.

In a separate statement, the company reported a fiscal first-quarter profit of $10.1 million, compared with a net loss of $10 million for the year-earlier. Sales for the three months ended June 30 rose 77 percent to $83.8 million.

The company distributes products through a network covering 30 provinces and municipalities in China and they’re offered in 71,000 retail outlets, according to its website.

(Synutra will hold a conference call on the earnings tomorrow at 8 a.m. New York time. To participate, dial 1-877- 312-8817 in the U.S. or 1-253-237-1180 internationally and use code 90057227.)

To contact the reporter on this story: Boris Korby in New York at Bkorby1@bloomberg.net

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