Bayer Hit by More Lawsuits Over Roundup
11/13 9:25 AM

BERLIN (Dow Jones) -- Bayer AG on Tuesday disclosed another jump in the number of lawsuits alleging the German company's recently-acquired weed killers cause cancer in a sign that an issue that has wiped billions off Bayer's market valuation isn't fading away.

Lawsuits from 9,300 plaintiffs were pending at the end of October, compared with 8,700 at the end of August, Bayer said. Plaintiffs claim that Roundup weed killers, which Bayer acquired in its takeover of Monsanto Co., made them ill and that Monsanto knew or should have known of the risks but failed to warn adequately.

Bayer rejects the allegations, arguing there are hundreds of scientific studies and regulatory authorities that demonstrate glyphosate, the compound contained in the weed killers, is safe to use.

"We continue to believe that we have meritorious defenses and intend to defend ourselves vigorously in all of these lawsuits," Chief Executive Werner Baumann said in a press release.

The latest increase in the number of cases highlights the tough task Bayer faces in trying to assuage investor concerns that its recent acquisition had burdened the pharmaceutical and chemicals company with a problem that could take years to resolve and could weigh on the company's share price for some time.

The trouble for Bayer began on Aug. 10, when a San Francisco jury held Monsanto liable for a former groundskeeper's terminal non-Hodgkin lymphoma and ordered a heavy fine on the U.S. company. At the time, Bayer had limited latitude to defend itself as it wasn't yet allowed to officially control Monsanto, pending asset sales required by antitrust authorities to close the $63-billion acquisition of the U.S. agricultural giant.

Bayer has been fighting back vigorously since, but markets remain skeptical. Since the verdict, Bayer has lost some EUR30 billion ($33.7 billion) in market capitalization as investors fear the issue could overshadow the integration process.

In late October, the San Francisco judge reduced the August jury award to $78.5 million from $289 million but maintained the jury's verdict that Monsanto acted with malice, sending shares down again. Investors had pinned their hope on a new trial after the same judge issued a tentative order for a new trial earlier in October in what could have allowed Bayer to argue this specific case afresh.

Bayer is now appealing the verdict with the California Court of Appeal, which it says is a single judgment that isn't binding for other cases. Bayer has been arguing that attorneys for the plaintiff Dewayne Johnson had relied on flimsy scientific evidence to prove a link to his cancer and that they had swayed the jurors with overly emotional and speculative arguments.

Meanwhile, the number of lawsuits has continued to rise and plaintiffs' lawyers have aired ads seeking new Roundup plaintiffs, particularly since the San Francisco verdict came out. So far this year, some 24,000 such TV ads have aired at an estimated cost of $5.7 million, according to Kantar Media CMAG data analyzed by litigation risk forecaster X Ante.

The wave of lawsuits started after the International Agency for Research on Cancer, a unit of the World Health Organization, in 2015 classified glyphosate as likely having the potential to cause cancer. The decision came despite Monsanto and other agricultural groups pushing back and pointing to other studies that have shown no link between cancer and the chemical.

While the number of lawsuits continues to rise -- and Bayer said it expects more to come -- the integration of Monsanto pushed third-quarter sales 23% higher to EUR9.91 billion.

Earnings before interest taxes depreciation and amortization before special items in the quarter was flat at EUR2.2 billion.

Net profit fell 26% to EUR2.89 billion from EUR3.88 billion a year earlier, when Bayer had booked a large gain from selling a stake in plastics and chemicals business Covestro AG. Bayer confirmed its full-year outlook. However, it warned that its outlook for its animal and consumer health divisions was looking increasingly ambitious.

Bayer continued to deleverage in the quarter. Net debt decreased 18.3% to EUR36.52 billion at the end of September helped by the proceeds from asset sales Bayer had to make to obtain regulatory approval for the Monsanto purchase.

Bayer shares opened up 1% after the company's third-quarter report.


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