Shares in consumer giant Reckitt Benckiser plunged nearly 10 per cent in early trades after a US jury found Abbott Laboratories failed to warn consumers about the health risks of its baby formula.
Shares had dropped to an 11-year low of 4,067p by 10:30am.
Abbott, the maker of the Similac formula sold by Reckitt, has been ordered to pay $495m (£386m) in damages.
Earlier this year, Reckitt’s arm Mead Johnson was ordered to pay $60m (£46.7m) in a similar case. Nearly 1,000 lawsuits are pending against the companies in the US.
Plaintiffs have argued that the formula causes bowel disease in premature babies, specifically necrotising enterocolitis – a life-threatening gastrointestinal disease.
Last week, Reckitt announced an ambitious £1bn turnaround plan, which included shedding brands like Cillit Bang and Air Wick. Mead Johnson is also set for the chopping block.
“The more setbacks for either baby formula maker, the more complicated it becomes for Reckitt to sell its nutrition arm. Reckitt last week indicated it might be up for sale, saying it was considering all options for the business,” AJ Bell analyst Dan Coatsworth said.
“Any potential buyer could be put off by the possibility of liabilities from the court cases, meaning the pressure is growing for Reckitt to find a way to ringfence a large amount of money in case it loses big time in the court battles,” he added.
Reckitt is due to face its own individual trial in late September.
The company’s share price has fallen by more than five per cent in the last month, and 25 per cent in the year to date.
Last week, it announced a 4.9 per cent decline in operating profit for the first six months of the year and a decline in diluted earnings per share of 6.8 per cent.
City A.M. has approached Reckitt for comment.