UPDATE 2-China quality group says mistakes were made in report on Mead milk
* Consumer watchdog says tests on milk had made mistakes
* Says there may still be quality issues
* Mead says has commissioned tests
By Sabrina Mao and Martinne Geller
BEIJING/NEW YORK, July 11 (Reuters) - A consumer watchdog in China said on Wednesday that a testing centre had made mistakes in reporting that some of Mead Johnson's baby formulas contained prohibited additives and expressed "deep regret" for the erroneous findings that led to a sharp fall in Mead's stock.
Shares of Mead Johnson Nutrition Co, maker of Enfamil baby formula, fell as much as 8 percent on Tuesday after Caijing, an influential Chinese business magazine, reported that vanilllin, a compound found in vanilla beans, was found in some of its baby formulas in central Hunan Province.
No spices should be added to food for such young babies, the report said, citing China's National Food Safety Standards for Users of Food Additives.
"On this matter, I can only express my deep regret," a representative of the policy research centre at the Hunan Province Credit-Building Association, surnamed Xia, told Reuters by telephone.
The Hunan Credit-Building Association had assigned the case to the Hunan Brands Reputation Investigation Centre, which commissioned the Hunan Agricultural University to conduct the inspection, Xia said.
"We sent the samples to the Hunan Agricultural University's Food and Nutrition Examination Centre for inspection," said Xia, who declined to give his full name due to the sensitivity of the matter. "They issued a preliminary report indicating that the milk powder contained vanillin compounds. But they later came forward to say that there were errors in their monitoring."
Xia said the group is a civil society organisation and does not come under the jurisdiction of the government.
However, he added that he still believed there were quality problems and that he would seek other agencies to test samples he had remaining, if needed.
"I hope that relevant supervision bodies can resolve this issue on the basis of seeking truth from the facts," Xia said.
According to the report, the testing group said batches of Mead Johnson formulas made on Oct. 22, 2011 and April 18, 2012 were found to contain the additive, which it said can be harmful to babies' liver and kidneys.
Vanillin is not an ingredient in any of Mead Johnson's Stage 1 formulas designed for infants up to six months old, said company spokeswoman Gail Wood.
"We are seeking clarification with the testing organization in China to understand their testing methodology and process," Wood said in an email. "Concurrently, a nationally certified test center is analyzing our Stage 1 product to confirm that it continues to meet all Chinese laws and regulations.
Xiao Xiang Morning Post, a Hunan newspaper, quoted an apology from an official called Secretary Xu from the Hunan Agricultural University on Tuesday for the errors made in the inspection report. Calls to the university went unanswered.
"It was our mistake, the test results basically did not contain any vanillin," the newspaper cited the official as saying.
Mead Johnson shares tumbled to as low as $72.40 on the New York Stock Exchange after the report. They closed down 4.3 percent, wiping off about $700 million in market value, based on Mead Johnson's 204.6 million shares outstanding as of March 2012.
"The reports of an additive found in the baby formula in China triggered volatility in the shares and a flurry of action on Mead options," said WhatsTrading.com options strategist Frederic Ruffy.
Despite the market's reaction, JP Morgan analyst Ken Goldman said he does not think Mead Johnson will suffer any meaningful sales or margin losses as a result of this issue.
Caijing also said the additive had been found in formulas made by Abbott Laboratories, owner of the Similac brand and Wyeth, owned by Pfizer Inc.
Abbott said it does not use vanillin in its product.
"There is no flavor addition in China Stage 1 infant formula and our product doesn't contain any material that is mentioned in the article," said Abbott spokesman Scott Stoffel.
Pfizer spokeswoman Joan Campion said vanillin is not an ingredient of the company's Stage One formulas, and that the products are continuously monitored for stringent quality and safety.
"We are concerned about the accuracy of this report, and we do not agree with the findings," Campion added.
Abbott shares closed up 6 cents at $65.67, while Pfizer shares closed down 1 percent at $22.44.