By Dominic Chopping

Shares in Reckitt Benckiser and Abbott Laboratories rose on Friday after a U.S. court cleared the companies of liability in a case concerning their baby formulas.

The lawsuit had alleged that Reckitt's Mead Johnson subsidiary, along with Abbott, failed to warn that their specialized formulas for premature infants increased the risk of bowel disease.

Reckitt shares topped the Stoxx Europe 600 index in early European trade, rising around 10%, the company's biggest one-day gain in 16 years. Shares in New York-listed Abbott were up 3.9%.

"This outcome illustrates that moving forward, plaintiffs face significant challenges due to the heavy burden they must meet in proving elements of their claims in every single case," Dettol and Strepsils maker Reckitt said.

The jury's verdict comes after previous rulings earlier this year resulted in verdicts of $60 million against Reckitt and $495 million against Abbott in compensation and damages from similar cases, and prompted Reckitt to consider selling off some of its home-care brands and launch a strategic review of its troubled Mead Johnson infant formula business.

Nearly 1,000 similar lawsuits are still pending against the companies and Reckitt said it will continue to "vigorously" defend itself against all the other cases.

Russ Mould, investment director at AJ Bell, noted that while the latest verdict offers a small slice of comfort for shareholders, there are still plenty of outstanding cases so the issue won't go away overnight.

"There has been nothing but bad news on this front for Reckitt for some time so it's not a surprise this chink of light has been seized upon by investors in a positive way," Mould said.

He adds that an eventual resolution of the issue could be a precursor to selling the Mead Johnson business, which has been "nothing short of a disaster" for Reckitt.

The British company bought U.S. baby formula maker Mead Johnson Nutrition in 2017 for $16.6 billion in a deal that aimed to almost double the size of the British company's consumer-health business and push it deeper into emerging markets.

Ahead of the verdict, Reckitt had lost around a third of its market value since agreeing to acquire Mead Johnson.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

November 01, 2024 10:00 ET (14:00 GMT)

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