Necrotizing Enterocolitis Litigation: A Critical Crossroads for Abbott and Mead Johnson

The ongoing litigation over necrotizing enterocolitis (NEC), a life-threatening intestinal disease linked to preterm infant formulas, has reached a pivotal phase in 2025. A U.S. judge’s recent ruling allowing testimony that Abbott and Mead Johnson’s products caused NEC has intensified legal and financial risks for both companies. With bellwether trials set to begin in May 2025, the outcomes could reshape their stock valuations, settlement strategies, and long-term reputations in the $80 billion infant formula market.

Judicial Proceedings: The Bellwether Trials and Their Stakes

The first four bellwether trials—pilot cases that will set precedents for thousands of pending lawsuits—are scheduled to begin in May 2025. These cases include Mar v. Abbott, involving the wrongful death of a premature infant who developed NEC after consuming Similac Special Care 24. The trials aim to test key arguments, such as whether manufacturers knew of the risks and failed to warn parents and caregivers.

Plaintiffs’ attorneys are expected to cite internal company emails, scientific studies, and expert testimony to prove negligence. For instance, a 2024 NIH-funded study in the Journal of the American Medical Association found that donor human milk reduces NEC risk by 50% compared to cow’s milk-based formulas—a stark contrast to Abbott and Mead Johnson’s products. This evidence could strengthen claims that manufacturers prioritized profits over safety.

Market Impact: A Stock Price Crossroads

The litigation’s financial toll is already evident. After a Missouri jury awarded $495 million to a plaintiff in July 2024—including $400 million in punitive damages—Abbott’s stock plummeted by $8 billion in after-hours trading.

Analysts warn that a plaintiff-friendly verdict in the May 2025 trials could trigger another sharp decline. Conversely, a defense win might temporarily stabilize investor confidence but risks being overturned by subsequent trials or scientific revelations.

Defendants’ Dilemma: Settle or Fight?

The companies face mounting pressure to settle. With over 598 cases consolidated in the Illinois MDL and new filings added monthly, litigation costs are soaring. Plaintiffs’ lawyers argue that Abbott could avoid market withdrawal of its formulas by simply adding clear NEC warnings—a move critics call “a reasonable solution.”

However, Mead Johnson has resisted, seeking to consolidate all cases under the MDL to streamline defenses. This strategy may backfire if juries follow the Missouri precedent, which demonstrated jury outrage over corporate negligence.

Scientific and Legal Momentum Against Defendants

The NIH study and prior rulings have eroded the defendants’ legal footing. For example, courts have rejected claims that hospitals “already knew” NEC risks, emphasizing that warnings must reach all caregivers, including parents. Defense arguments about “fraudulent joinder” (e.g., linking Mead Johnson to cases where Abbott’s formula was used) have also been dismissed.

Conclusion: A High-Stakes Quarter for Investors

As of April 2025, the NEC litigation stands at a critical juncture. The May 2025 bellwether trials will likely determine whether Abbott and Mead Johnson face mass settlements or prolonged litigation. Key risks for investors include:

1. Stock Volatility: A plaintiff win could mirror the July 2024 verdict, triggering another $8+ billion drop in Abbott’s valuation.
2. Settlement Costs: With 598+ cases and rising, settlements could exceed $10 billion if punitive damages follow the Missouri model.
3. Reputational Damage: Negative jury outcomes could deter hospitals and parents from using their products, further eroding market share.

On the flip side, a defense victory might offer temporary relief but risks being undermined by the NIH study’s scientific weight and ongoing depositions of corporate executives.

For now, the writing on the wall is clear: investors should brace for turbulence. With NEC-related lawsuits growing and juries increasingly skeptical of corporate transparency, Abbott and Mead Johnson’s financial futures hinge on the next few months. Those holding their stocks may want to monitor the bellwether trials closely—and consider hedging against the risks.