Mead Johnson Nutrition Co., maker of the Enfamil baby formula, fell the most ever after Wal-Mart Stores Inc. (WMT) pulled a batch of the powdered product after a newborn given it died. There is no evidence the second infant who was sickened was given the same formula, Mead Johnson said.
Mead Johnson dropped 10 percent to $68.76 at the close of New York trading. The decrease was the biggest drop since February 2009, when the Glenview, Illinois-based company’s shares were first publicly traded.
The baby who died in Lebanon, Missouri, tested positive for Cronobacter, a microorganism found in the environment that can cause serious illness, 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 made 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.
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.
Mead Johnson has received any complaint or requests for samples related to the infection, Perille said.
“As far as we know, there is no connection between Enfamil Newborn and this second case,” Perille said. “Clearly if this other case was connected to Enfamil Newborn, we would have received case information and been contacted for samples.”
Whether the formulas were made by the same manufacturer is still under investigation, said Lola Russell, a spokeswoman for the U.S. Centers for Disease Control and Prevention.
The newborn who survived was from Illinois, said Gena Terlizzi spokeswoman for the Missouri health department. She referred questions on the formula to that state’s health officials
Missouri and U.S. public health agencies are collecting several samples from powered infant formula from the infants’ homes, as well as samples from clothes and water.
While the source of the bacteria isn’t yet known, the growing number of infections in newborns provides “compelling evidence” that milk-based powdered infant formulas have served as a source, said Margaret Donnelly, director of the state health department, in the Dec. 19 statement. No breastfed infants have contracted the infection, she 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.
While it’s premature for parents to change what they feed their infants, it’s important to remind them to prepare formula properly, said Lorry Rubin, chief of pediatric infectious diseases at Cohen Children’s Medical Center of New York.
Glassware and bottles should be cleaned and sterilized and the water should be boiled and cooled before it is added to powered formula, he said. Any extra prepared formula should be immediately refrigerated and used within 24 hours, he said.
Bacteria from the Cronobacter family are known to have contaminated infant formula, he said in a telephone interview. It’s similar to the bacteria humans carry in their gut, and typically doesn’t cause significant concern, he said.
“The powder formula isn’t necessarily a sterile product, but taking precautions, even if there is a small amount of bacteria in there, it shouldn’t be enough to harm the baby,” Rubin said. “If you re-warm it or make improperly, the bacteria can multiply and you have a higher risk of getting ill.”
The Enfa brands, which include Enfamil, accounted for 79 percent of Mead Johnson’s $3.14 billion in 2010 revenue (MJN), 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, Russell, the 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.
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