Perrigo's Bitter Pill: Infant Formula Deal Spurs Fraud Lawsuit

NEW YORK, NY – December 09, 2025 – A strategic acquisition meant to solidify Perrigo Company plc’s position in the U.S. infant formula market has devolved into a significant legal and financial crisis for the consumer self-care giant. The company is now facing a barrage of securities fraud class action lawsuits alleging it misled investors about the health of its newly acquired infant formula business, culminating in a series of damaging disclosures that erased a quarter of its stock value in a single day.

The lawsuits, filed on behalf of shareholders who purchased PRGO stock between February 2023 and November 2025, claim that Perrigo concealed critical problems at an infant formula plant it bought from Nestlé. These alleged omissions include significant underinvestment in the facility, undisclosed manufacturing deficiencies, and the need for substantial capital expenditures far beyond what the company had publicly estimated. This chain of events now calls into question the due diligence behind the acquisition and the transparency of the company's financial reporting.

An Acquisition's Curdled Promise

In November 2022, against the backdrop of a nationwide infant formula shortage that exposed deep vulnerabilities in the U.S. supply chain, Perrigo announced a seemingly astute strategic move. It acquired Nestlé's Gateway infant formula plant in Eau Claire, Wisconsin, along with U.S. and Canadian rights to the Good Start® brand, for $170 million. The company coupled this with a pledge to invest another $60 million to expand the plant’s capacity.

Perrigo’s leadership hailed the deal as a cornerstone of its “Supply Chain Reinvention program.” The stated goals were to bolster industry capacity, enhance consumer choice, and secure a long-term manufacturing supply for its store-brand and contract customers. At the time, Perrigo’s CEO, Murray Kessler, projected the acquisition would be “immediately accretive to net sales, gross margin, and earnings per share,” creating significant shareholder value.

However, the lawsuits now paint a starkly different picture. They allege that behind these optimistic projections, the acquired business was suffering from systemic neglect. Plaintiffs claim Perrigo failed to disclose that the Gateway facility required massive remediation efforts to bring it up to standard, a financial burden that would ultimately undermine the company’s earnings and cash flow projections. The core of the legal challenge is that Perrigo's positive statements about its business were materially misleading because they were not tempered by the reality of these inherited operational and financial liabilities.

A Trail of Damaging Disclosures

The market’s confidence in the acquisition began to visibly erode through a series of troubling announcements. The first major shock came on February 27, 2024, when Perrigo revealed its fiscal 2023 earnings. The report included unexpected acquisition-related charges and an additional $35 million to $45 million earmarked for remediations to address production and facility issues in the infant formula business. The news, which also highlighted a 50% year-over-year decline in earnings per share driven by these actions, sent the company's stock tumbling over 15%.

Despite assurances that the business would stabilize, more bad news followed. On August 6, 2025, the company disclosed that its gross profit had decreased by nearly $30 million, attributing the decline in part to “production variability in infant formula leading to an increase in product scrap.” This admission of operational inefficiency and waste triggered another sell-off, with the stock falling more than 11%.

The situation reached a crisis point on November 5, 2025. In a stunning reversal, Perrigo announced it was initiating a “strategic review” of the entire infant formula business, including a reassessment of its previously announced investment plans. On the same day, it released dismal third-quarter results and lowered its full-year guidance, explicitly citing “soft OTC consumption & infant formula dynamics.” The one-two punch was devastating. Investors fled the stock, driving its price down by more than 25% and wiping out hundreds of millions in market capitalization.

Manufacturing Woes and Consumer Trust

While the lawsuits focus on financial disclosures, the underlying allegations of “significant manufacturing deficiencies” touch upon a far more sensitive issue: consumer safety and trust. The infant formula industry operates under intense scrutiny from the FDA, and any hint of quality control failure can have severe reputational consequences. This is not just a theoretical risk for Perrigo.

In March 2023, just months after the acquisition, Perrigo issued a voluntary recall for certain lots of Gerber® Good Start® SoothePro™ Powdered Infant Formula produced at the very same Eau Claire, Wisconsin, facility. The recall was initiated due to the potential presence of Cronobacter sakazakii, the same bacterium linked to the 2022 Abbott plant shutdown that precipitated the national shortage. Although Perrigo stated that no distributed product had tested positive, the event highlighted the operational risks inherent in the facility.

This was followed by another recall in August 2024 for store-brand infant formula, this time due to elevated levels of Vitamin D. These incidents, combined with the lawsuit's allegations and the disclosure of “product scrap,” suggest a pattern of persistent operational challenges that go beyond simple integration hurdles. For a company operating in a sector where product integrity is paramount, such issues represent a significant threat to its brand and market standing.

Investor Fallout and an Uncertain Future

The fallout from the troubled acquisition now extends from the factory floor to Wall Street and the courtroom. The class action lawsuits, with a lead plaintiff deadline of January 16, 2026, expose Perrigo to potentially costly litigation and damages. More immediately, the saga has severely damaged management's credibility with investors and analysts.

The strategic review announced in November is a clear admission that the initial strategy has failed. The company is now exploring a “full range of alternatives” for a business it acquired with great fanfare just three years prior. Analysts are now questioning the company’s execution and the viability of its turnaround narrative, with the persistent problems in the infant formula segment casting a long shadow over its broader portfolio. For investors and industry observers alike, the outcome of this review will be a crucial indicator of whether Perrigo can restore credibility and salvage value from a deal that has curdled into a significant corporate liability.