Healthcare giant Abbott Laboratories (ABT) faced a major legal setback after a jury ordered the company to pay $495 million in damages to settle a baby-formula lawsuit. As a result of this announcement, ABT stock fell about 5% in after-hours trading on Friday.
The verdict stems from a lawsuit alleging that the company’s specialized formula for premature infants caused a young girl to develop necrotizing enterocolitis (NEC), a potentially fatal bowel disease. The total settlement amount consisted of $95 million in compensation and $400 million in punitive damages.
The lawsuit focused on the company’s alleged failure to warn parents about the risks of NEC associated with its formula.
ABT Denies Wrongdoing
Abbott has denied the allegations, claiming that its formulas are safe and that the girl’s injuries were caused by birth trauma.
Furthermore, the company plans to appeal the verdict and has highlighted the importance of its specialized formulas for premature infants.
Abbott’s Main Risk: Legal & Regulatory
The main risk for Abbott is related to legal and regulatory issues. In recent years, the company has faced multiple legal challenges, including lawsuits regarding its Similac baby formula and allegations of mismanagement and financial loss from shareholders.
According to TipRanks’ Risk Analysis tool, Abbott’s exposure to legal and regulatory risks is significantly higher than the industry average. This category accounts for 30% of its total risks, which is higher than the industry average of 19%.
What Is the Price Target for ABT Stock?
Overall, on TipRanks, ABT has a Strong Buy consensus rating based on 11 Buy and one Hold recommendations assigned in the past three months. The analysts’ average price target on Abbott stock of $126.75 implies a 20.4% upside potential from current levels. Shares of the company have declined over 1% in the past three months.
