UPDATE 2-Synutra denies reports of tainted formula; shrs slump

Mon Aug 9, 2010 4:07pm EDT

* Media reports say co's baby formula tainted

* Reports: product causes premature sexual development

* Co refutes allegations; says will take legal action

* Shares fall as much as 35 pct (Adds details from company's statement, updates share price)

Aug 9 (Reuters) - Shares of Chinese baby-formula maker Synutra International (SYUT.O) fell as much as 35 percent on Monday after reports in Chinese media linking it to babies developing premature sexual characteristics.

However, in a statement late Monday, the company denied the allegations and said it was in the process of taking legal action to protect its brand.

"We have worked closely with state authorities, including the Chinese Dairy Association and the office of food safety, to test product samples, to prove that these claims are false. We expect that the results of these tests should be made public soon," Synutra Chief Executive Liang Zhang said.

Earlier, state-run Chinese newspaper Global Times, quoting a report from Beijing-based Health Times, said three babies from Hubei province showed symptoms of breast development and abnormal levels of female hormones.

The months-old infants had been fed baby-formula products tagged with the same lot number produced by Synutra, Global Times said, citing the earlier report.

Synutra, which sells its products in China, said it does not add hormones to its products as suggested in the media reports and has invested heavily in research, quality control, formulations and ingredients.

In 2008, milk formula that was adulterated with melamine, an industrial compound used in making plastics and fertilizer, killed at least six toddlers and made almost 300,000 sick, prompting Chinese-made products to be stripped from shelves worldwide. [ID:nPEK192060]

Shares of the company closed down 27 percent at $12.72 Monday on Nasdaq, after hitting a low of $11.24 earlier in the day. (Reporting by Abhishek Takle and Shradhha Sharma in Bangalore; Editing by Anthony Kurian)

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