Shares of Abbott Laboratories rose on Friday after the Club holding company scored a surprise victory in a trial into the safety of its formula for premature babies. Abbott Labs' specialized formula is not responsible for a young baby developing a serious intestinal disease known as necrotizing enterocolitis (NEC), a Missouri state court jury ruled Thursday night, concluding a trial lasting about five weeks. closely by investors. . The jury also cleared Mead Johnson, a subsidiary of Reckitt Benckiser, and St. Louis Children's Hospital of liability in the case. The plaintiffs had argued that Abbott and Mead Johnson formulas, used to treat premature babies in neonatal intensive care units, raised the risk of developing NEC and that the companies failed to adequately disclose that risk. For their part, Abbott and Mead Johnson strongly deny the allegations and defend the products as medically necessary treatments for babies in certain cases where breast milk cannot be used. “We are pleased with the jury's decision,” Abbott spokesman Scott Stoffel said in a statement to CNBC on Friday morning. “The decision reinforces what we, the medical community and regulatory bodies have said: that nutrition products for premature babies are safe and there is no reliable scientific evidence that they cause or contribute to NEC. Abbott defends the vital role it plays its formula for premature babies and human milk fortifiers are used in hospitals to feed premature babies. ABT YTD mountain Abbott Laboratories stock performance so far this year. Big picture Investors were nervous before Thursday night's verdict because both companies had lost similar cases this year: Mead Johnson in March, followed by Abbott Labs in late July. The defeat suffered by Mead in March, in particular, put the NEC issue firmly in the spotlight, causing a sharp and prolonged sell-off in shares of both companies. We bought additional shares of failing Abbott Labs on multiple occasions, believing that the magnitude of the market value drop did not adequately reflect the potential damages the company would have to pay if its legal fight went south even though the medical community was in favor. his side. That includes a trio of major U.S. health agencies, which last month issued a statement supporting specialized infant formulas like Abbott's. The legal trouble over Abbott Labs has been real, even if the stock has found some traction in recent months. Through Thursday's close, shares were up about 13% from their 2024 lows set on July 18. Abbott's highest close of the year, at $120.96 per share, came on March 8, before NEC's concerns prevailed. Based on Friday's premarket earnings, the stock was on track to approach those levels. In short, Abbott Labs still faces other cases over its specialized formulas across the country, but Thursday night's victory is significant. The reaction of the shares makes this clear, gaining more than 4.5%. “They won a case they were supposed to lose…The day the plaintiffs took it to Abbott is over,” Jim Cramer said Friday on CNBC. “Those stocks are very cheap,” he added. Abbott shares traded around 22 times forward earnings estimates on Friday, below its five-year average of 24, according to FactSet. One reason this victory is so important: the venue for this case was generally considered plaintiff-friendly; Cramer has repeatedly noted that the case Abbott Labs lost in July was also in Missouri state court. Those concerns were compounded during the October trial, when the judge did not allow a recent statement from U.S. health agencies to be shown to the jury. “There is no conclusive evidence that premature infant formula causes NEC,” the Food and Drug Administration, the Centers for Disease Control and Prevention, and the National Institutes of Health wrote in an October statement. At the time, we heralded that statement as a victory for Abbott, only to have to temper our expectations after the judge made his decision. Still, we think Abbott Labs could lose this case, but at least as trials begin in other states, the company will most likely be able to use the statement of support from the FDA, CDC, and NIH to bolster its defense. With victory in hand, Abbott Labs will now begin the next phase of its legal fight on much stronger ground. The hope is that eventually the conversation about Abbott Labs will focus squarely on its attractive fundamentals, which were on display last month in its third-quarter earnings report. When that happens, healthcare investors should like what they hear. (Jim Cramer's Charitable Trust is long ABT. See here for a full list of stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable fund's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION OR DUTY EXISTS OR IS CREATED BY VIRTUE OF THE RECEIPT OF ANY INFORMATION PROVIDED IN RELATION TO THE INVESTMENT CLUB. 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Stacey Westcott | Chicago Tribune | Tribune news service | fake images
Abbott Laboratories Shares rose on Friday after holding company Club scored a surprise victory in a trial into the safety of its formula for premature babies.
