Breaking News

Tweet TWEET

Mead Johnson Rises as Baby Illnesses Not Linked to Formula

Mead Johnson Nutrition Co. (MJN), maker of the world’s best-selling baby formulas, gained 3.8 percent after U.S. regulators said they hadn’t found a connection between infant illnesses and the company’s products.

Mead Johnson rose to $71.35 as of the 4 p.m. close in New York for the biggest increase since Dec. 27. The shares are down 6.7 percent since Dec. 21, the day before it was reported that retailers pulled the company’s Enfamil formula from shelves.

The formula was removed from stores as a precaution after regulators said a Missouri infant who had been infected with the bacterium Cronobacter and died had used the product. Tests conducted by the Glenview, Illinois-based company didn’t find bacteria in the batch of formula used by the Missouri infant. Cronobacter also killed a baby in Florida and sickened two babies in Illinois and Oklahoma, regulators said Dec. 30.

“Based on test results to date, there is no need for a recall of infant formula” and parents may continue to use it according to instructions on the label, the Food and Drug Administration and Centers for Disease Control and Prevention said in a joint statement. The FDA hasn’t found evidence that any contamination from Cronobacter occurred during manufacturing or shipping, the agencies said.

“Shares should bounce nicely on this news, but it could take some time for the stock to fully recover,” Edward Aaron, an analyst with RBC Capital Markets, wrote in a research note today. “Ultimately, we see this as an opportunity to own the same great growth story at a cheaper valuation.”

Genetic Differences

CDC tests on the Cronobacter germs that infected the babies in Missouri and Illinois showed the bacteria differ genetically, suggesting that the two cases aren’t related, the agencies said. Bacteria from the Oklahoma and Florida cases, brought to the agency’s attention after the other two incidents were publicized, aren’t available for analysis, they said.

The CDC found Cronobacter in samples, provided by Missouri health officials, from an open container of the powdered infant formula, an open bottle of nursery water and prepared infant formula in the case of the baby who had died.

“It is unclear how the contamination occurred,” the agencies said. “The FDA tested factory sealed containers of powdered infant formula and nursery water with the same lot numbers as the opened containers collected from Missouri, and no Cronobacter bacteria were found.”

Wal-Mart Effect

Mead Johnson’s shares had dropped 15 percent on Dec. 22 and Dec. 23 after retailers such as Wal-Mart Stores Inc. pulled Enfamil.

“We’re currently reviewing and assessing the test results, and working with FDA, CDC and Mead Johnson to determine the appropriate next steps,” Dianna Gee, a spokeswoman for Bentonville, Arkansas-based Wal-Mart, said by telephone today. The product batch pulled from shelves has not been returned, she said. Wal-Mart is still selling other Enfamil products.

“Retailers should be confident in the safety of Enfamil Newborn, based on results of tests performed by the FDA, CDC and Mead Johnson,” Chris Perille, a Mead Johnson spokesman, said in an e-mailed statement today. “Each chain has its own unique process to work through, but we are aware of a number of national and regional retailers that are releasing the batch they pulled and held back into regular inventory.”

No Disclosure

Regulators didn’t disclose what brands of formula were connected to the infant infections in Oklahoma and Florida. Federal and state health officials have been investigating multiple possible causes of the illnesses, not just formula.

The bacterium, commonly found in the environment, hospitals and homes, can multiply in powdered formula after the product is mixed with water, the FDA and CDC said.

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 best-selling baby formulas, the company said in a February filing.

The FDA inspected Mead Johnson’s plant in Zeeland, Michigan, that manufactures Enfamil, the company said Dec. 28.

Cronobacter-related illnesses are rare and can cause severe blood infections or meningitis in infants. While the CDC typically learns of about four to six Cronobacter infections a year, 12 cases have been reported in 2011 “with recent increased awareness,” the agencies said.

To contact the reporters on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net; Molly Peterson in Washington at mpeterson9@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.