Abbott Pays $670 Million to Settle Formula Claims as Legal Risks Persist

Abbott Laboratories (NYSE: ABT ) has agreed to pay $670 million to settle claims involving about 2,000 people who alleged that its specialized preterm infant formulas contributed to necrotizing enterocolitis (NEC), a serious and potentially fatal bowel disease affecting premature infants. The settlement also resolves Abbott's appeal of a $495 million verdict involving an Illinois mother, after that judgment was upheld by a Missouri appeals court. Abbott did not admit liability and continues to maintain that its products are safe.

The bigger issue for investors is that the settlement does not fully end the litigation. Abbott says claims from as many as 12,700 people remain, although that figure includes duplicate and unsupported claims as well as cases where it is unclear which manufacturer's formula was used. More than 825 federal cases are consolidated in Chicago, with additional cases pending in state courts.

That makes the settlement both a cost and a potential step toward reducing uncertainty around the litigation.

The strongest argument for Abbott Laboratories (NYSE:ABT) is that the $670 million settlement could put a meaningful portion of the legal risk behind the company. Rather than continuing to spend years fighting individual cases and risking additional large jury awards, Abbott has chosen to settle with a sizable group of plaintiffs. The company said the agreement is intended to substantially resolve the broader litigation.

There is also an important distinction between the products involved in the lawsuits and Abbott's broader nutrition business. The litigation concerns specialized formulas and products used for premature infants in hospitals, rather than the ordinary infant formulas sold through stores. That limits the direct exposure of Abbott's wider consumer nutrition portfolio.

Abbott Laboratories (NYSE:ABT)'s underlying business also gives investors some cushion against the settlement. The company reaffirmed its 2026 comparable sales growth guidance of 6.5% to 7.5% and raised its adjusted EPS outlook to $5.45-$5.60 after its second-quarter results. Medical Devices, Diagnostics and other businesses continue to provide growth engines outside Nutrition.

There is also evidence that the Nutrition business itself is recovering. Abbott reported that second-quarter Nutrition sales benefited from a recovery in U.S. infant-formula market share and growth in its adult nutrition business. Most importantly, the scientific and regulatory picture is not as straightforward as the lawsuits suggest. Reuters reported that U.S. regulatory agencies and an NIH-convened working group found that higher NEC rates were linked to the absence of breast milk rather than formula use. Abbott can therefore continue defending the safety of its products while settling cases for financial and strategic reasons.