ABT Stock Climbs as Abbott Reaches a Baby Formula Deal With the FDA

  • Abbott Laboratories (NYSE:ABT) has reached a deal with the U.S. Food and Drug Administration that allows it to restart its baby formula manufacturing plant
  • The development should help to alleviate a shortage of baby formula across the U.S.
  • Relief is also coming from Nestle (OTCMKTS:NSRGY), which is shipping baby formula products to the U.S. from Europe
Close up of Abbott Laboratories sign at their headquarters in Silicon Valley
Source: Sundry Photography/Shutterstock.com

Abbott Laboratories (NYSE:ABT) stock are rising 4% today on news that the company has reached a deal with the U.S. Food and Drug Administration (FDA) that should allow it to reopen its infant formula manufacturing plant in Michigan and restart shipments within eight weeks.

Abbott Labs is one of the largest manufacturers of baby formula brands, including Similac, in the U.S. Earlier this year, the company closed its Sturgis, Michigan plant after reports of serious bacterial infections in four American infants.

The recall and shutdown has worsened a baby formula shortage that began with pandemic supply chain issues. As a result, Switzerland-based Nestle (OTCMKTS:NSRGY) is now flying baby formula to the U.S. from Europe.

Prior to today’s 4% gain, ABT stock had fallen 21% year to date.

What Happened With ABT Stock

In a statement, Abbott Laboratories said that it has reached an agreement with the FDA to resume production of baby formula at its Michigan plant. This marks a major step toward resolving a nationwide shortage of the critical product.

The company said once the FDA confirms that it has met initial requirements, the Michigan plant could restart within two weeks. Full production is likely to take up to eight weeks.

Meanwhile, Nestle says it is shipping Gerber baby formula to the U.S. from the Netherlands in an effort to ensure that parents continue to have access to the product that their babies and infants need to live.

Production at the Abbott plant was halted in February of this year so that the company could resolve multiple health issues raised by FDA inspectors. Consumers reported five infants who were sick, including four with Cronobacter sakazakii infections and one with Salmonella. These infants received formula products made at Abbott’s Michigan plant.

Why It Matters

Baby formula in the U.S. is currently in short supply, causing panic.

In addition to Nestle shipping supplies to the U.S. from Europe, baby formula manufacturer Reckitt Benckiser (OTCMKTS:RBGLY) said it will boost its production by 30% to help meet current demand. It will also make more frequent deliveries to stores as it looks to help alleviate a nationwide shortage in the U.S.

What’s Next for Abbott Labs

ABT stock gets a bump today on news that the company has reached a deal with the FDA and is in the process of restarting its baby formula manufacturing plant in Michigan. This development should help to ease the current shortage of baby formula across the U.S. and is renewing investor confidence in Abbott Laboratories and its shares.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

Article printed from InvestorPlace Media, https://investorplace.com/2022/05/abt-stock-climbs-as-abbott-reaches-a-baby-formula-deal-with-the-fda/.

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