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Baby formula probe widens beyond Enfamil
December 23, 2011 / 12:17 AM / 6 years ago

Baby formula probe widens beyond Enfamil

(Reuters) - U.S. health regulators said on Friday they are looking at several types of baby formula that could be linked to the death of an infant, expanding an investigation beyond Mead Johnson’s market-leading Enfamil.

An official from the Centers for Disease Control and Prevention (CDC) said the baby, 10-day-old Avery Cornett of Lebanon, Missouri, had consumed a variety of baby formulas before his death but declined to give more details.

Initial results of the probe could be available at the end of next week at the earliest, though the full investigation could take up to a month.

A top investment bank warned that Enfamil sales could be hurt even if health regulators find no link between it and the death.

Shares of Mead Johnson Nutrition Co, the largest U.S. formula maker, closed 5 percent lower on Friday, on top of a 10 percent drop on Thursday when news first emerged that Wal-Mart Stores Inc was pulling cans of Enfamil Newborn formula off its shelves following the death of the infant.

The baby had been fed the formula and tested positive for Cronobacter, a bacterium that has sometimes been linked to rare illnesses in newborns. Cronobacter has been found in milk-based powdered baby formula, and is also a relatively common environmental contaminant.

The CDC official said the infant also consumed other types of baby formula before his death, so the link to Enfamil was still unproven.

He declined to name the other formulas that could be involved, and whether they were also powdered, or liquid.

“At this point, no formula samples have yielded Cronobacter,” said Dr. Robert Tauxe, deputy director of the CDC’s division of foodborne, waterborne and environmental diseases.

While health officials remained wary of linking Enfamil to the infant’s death, Goldman Sachs cut its financial targets for Mead Johnson. And Standard & Poor’s said it was assessing the impact of the investigation on the company, including whether it would have to be put on credit watch.

“We see risk that consumers trust in the Enfamil brand is damaged, regardless of the outcome of any investigation,” Goldman Sachs analyst Jason English said in a client note.

He lowered his estimates for Mead Johnson’s earnings in 2012 through 2014 by 3 percent on average. In particular, he cut his 2012 earnings per share forecast to $3.17 from $3.27. He also trimmed that 2013 forecast by 10 cents to $3.50.

As a result of those lowered expectations, English cut his share price target for Mead Johnson to $74 from $80. The stock fell $3.47 to end at $65.29 on Friday.

Mead Johnson’s “Enfa” family of products, which includes Enfamil, accounts for about 79 percent of total sales, according to Standard & Poor‘s. Mead Johnson reported $3.14 billion in sales in 2010.

The ratings agency retained its “triple-B” rating and “positive” outlook on Mead Johnson’s debt, though it said the company could lose sales if consumers switch to another brand of baby formula while waiting for the results of the investigation.

FORMULA WOES

Another baby, in Illinois, got sick from Cronobacter infection earlier this month, but later recovered. Regulators said that infant consumed a number of products and investigators are still looking into what caused the illness. It is unknown whether the baby also used Enfamil formula, and investigators are analyzing the DNA from both infection strains to see if they are similar.

The batch was produced at Mead Johnson’s facility in Zeeland, Michigan, company spokesman Chris Perille said. Enfamil Premium Newborn is produced exclusively for use in the United States and is not sold outside of the country, he added.

Abbott Laboratories - maker of Similac, the No. 2 U.S. formula brand - voluntarily recalled millions of containers of Similac powdered formula last year after beetles were found in the products and in a plant where they were made.

D.A. Davidson analyst Tim Ramey said it took about six months for Abbott’s Similac business to recover. During that time, Enfamil sales rose.

“They’re going to trade share back and forth,” Ramey said. “If it turns out there’s a problem, that will favor Abbott Labs.” Shares of Abbott Labs edged 0.6 percent higher to $56.

Wal-Mart began taking 12.5-ounce cans of Enfamil Newborn from lot number ZP1K7G from shelves late Monday night. Other retailers who carried the same product - including Walgreen Co, Supervalu Inc, Safeway Inc and Kroger Co - followed suit.

Siobhan DeLancey, spokeswoman for the U.S. Food and Drug Administration (FDA), said the agency was analyzing samples of unopened baby formula containers from the infant’s home, as well as from several retail stores, to see if other Enfamil lots had problems, and where the lots came from.

She said the Centers for Disease Control and Prevention (CDC) would test the open containers of formula, the water in the home, and the mixture of formula and water.

The results of the investigation could come as early as the middle of next week, DeLancey confirmed.

However, the CDC said DNA samples from the baby’s strain of the infection will not be available until the end of next week, making it impossible to link the baby’s illness to any kind of formula until then.

Additional reporting by Brad Dorfman in Chicago; Editing by Richard Chang

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