Mead Johnson Increases as Baby Illnesses Not Linked to Formula

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

Mead Johnson rose 4.6 percent to $71.90 at 8:30 a.m. New York time. The Glenview, Illinois-based company’s shares increased 10 percent in 2011.

Retailers pulled Mead Johnson’s Enfamil nutrition formula from shelves last month after regulators said a Missouri infant who had been infected with the bacterium Cronobacter and died had used the product. Tests conducted by the 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.”

Mead Johnson’s shares had dropped 15 percent on Dec. 22 and Dec. 23 after retailers such as Wal-Mart Stores Inc. pulled Enfamil. Dianna Gee, a spokeswoman for Bentonville, Arkansas-based Wal-Mart, didn’t return a call made before the beginning of business hours on whether the product had been returned to store shelves.

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 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.

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