US healthcare group Abbott Laboratories is planning to separate its nutrition business into a standalone public company with $8.5bn in annual sales, after the division was rocked by costly litigation over baby formula.
Abbott on Wednesday said that, as an independent company, the nutrition business “will be better positioned to focus its resources more strategically”. The business is best known for nutritional shakes Ensure and Glucerna, as well as baby formula brand Similac.
Abbott is the latest company to resort to shedding its nutrition business amid a wave of class action lawsuits and product recalls that have hit the industry in recent years. Reckitt Benckiser said in 2024 that it was considering strategic options for its nutrition business Mead Johnson, but is yet to offload the asset.
Between them, Abbott and Mead Johnson faced 1,700 lawsuits involving claims on behalf of 12,700 infants that their baby formula contributed to babies developing necrotising enterocolitis, a serious bowel disease.
Abbott in August agreed to pay $670mn to settle claims brought on behalf of about 2,000 children who developed bowel disease after using Similac, but the company continues to deny any wrongdoing. In September, Abbott also paid nearly $385mn to the US justice department to resolve a False Claims Act case related to contamination at a Michigan plant.
Abbott’s recent performance has been weighed down by disappointing results in its nutrition division. The company’s shares in January tumbled 10 per cent in a single session — its worst trading day since 2002.
However, the company reported results on Wednesday and said sales in its nutrition business during the third quarter were up 5.1 per cent from a year ago, with growth across its US and international adult and paediatric divisions.
The group’s shares erased an early gain to be 4.3 per cent lower by midday on Wednesday, taking their year-to-date loss to almost 22 per cent and giving the company a market capitalisation of $169bn.
Abbott shareholders will be granted shares in the new publicly traded entity through a tax-free spin-off, which should be completed by the end of next year, the company said on Wednesday. Abbott Nutrition executive Daniel Salvadori will serve as chief executive of the new company.