Bayer says more Americans are alleging weed killers cause cancer
German firm’s shares fall amid concerns of costly litigation following Monsanto deal
BERLIN— Bayer AG said the number of American plaintiffs alleging the company’s newly acquired weed killers cause cancer has risen sharply, adding to concerns about potentially lengthy and costly litigation stemming from its acquisition of Monsanto.
The company on Wednesday also lowered its full-year earnings outlook because of delays in closing its $63 billion purchase of Monsanto, which included a portfolio of herbicides, including its flagship Roundup, that contain glyphosate.
Bayer said Wednesday it faced some 8,700 plaintiffs across the U.S. as of late August — mainly cancer patients who claim to have fallen ill after being exposed to the glyphosate-containing Monsanto herbicides.
Last month, shortly after Bayer closed the acquisition, Monsanto was ordered to pay $289.2 million by a California state jury. It found that Monsanto’s Roundup and Ranger Pro products presented a “substantial danger” to consumers, and that Monsanto knew or should have known of potential risks and failed to warn users.
Bayer rejected the verdict as “wrong,” and is seeking a review of the court decision. It said it would appeal if necessary, a process that it expects could take up to a year. Such large jury awards are often ultimately reduced and in some cases overturned. Bayer hasn’t disclosed any provision for liabilities linked to the cases. The company argues some 800 studies have proven that the chemical is safe and doesn’t cause cancer.
Bayer’s shares opened 2.9% lower after the earnings report and were still trading down 1.5% in afternoon trade. The company’s shares have lost over 15% since the August 10 verdict.
As of late July, Bayer counted some 8,000 plaintiffs. A few months earlier — before the California jury victory — the number stood at some 5,200.
“Despite overall reassuring results, the glyphosate litigation uncertainty will likely remain an overhang in the midterm,” Jefferies
“Despite overall reassuring results, the glyphosate litigation uncertainty will likely remain an overhang in the midterm.”
JEFFERIES ANALYSTS
analysts wrote in a note to investors.
Bayer said it hadn’t seen a decline in demand for its glyphosate products because of the litigation and that it didn’t expect to see any going forward as regulators hadn’t changed their stance that the chemical was safe. “Glyphosate has been used and trusted for over 40 years,” said Liam Condon, head of Bayer’s Crop Science business, which now includes Monsanto.
Roundup has come under increased scrutiny after a unit of the World Health Organization in 2015 said that glyphosate was probably carcinogenic. Yet further studies have produced mixed results about the potential carcinogenic hazard of glyphosate. The U.S. Environmental Protection Agency in September 2017 concluded a decades-long assessment of glyphosate risks and found the chemical not likely carcinogenic to humans.
Bayer on Wednesday didn’t say how much money it was setting aside to cover legal costs or potential payments. “We continue to believe that we have meritorious defences and intend to defend ourselves vigorously in all of these lawsuits,” the company said in a statement.
Bayer expects more lawsuits in the future. A next case was set to go to trial in Missouri in late October but Bayer Chief Executive Werner Baumann on Wednesday said this now wasn’t likely to start until 2019. So far, the majority of cases were filed in Missouri, Delaware and California, Bayer said.
The Leverkusen-based company closed the Monsanto deal on June 7 following two years of regulatory review during which the company had to shed more assets than originally planned to get the green light. Bayer blamed its lowered earnings outlook on the longer-than-expected review.
“The acquired business generates the majority of its sales and, above all, earnings in the first half of the year,” Mr. Baumann said.
Bayer said it now expects full-year core earnings per share of between 5.7 euros ($6.6) and 5.9 euros, lower than consensus expectations and below 2017’s
6.64 euros a share, a restated figure to account for the integration of Monsanto. Bayer had previously targeted core EPS to stay flat.
However, Bayer does expect the acquisition to boost its full-year sales, which it now targets at more than 39 billion euros, compared with its previous forecast of 35 billion euros.
Bayer reported a fall in secondquarter net profit to 799 million euros from $1.22 billion a year earlier after Bayer further reduced its stake in plastics company Covestro AG.
Sales rose 8.8% to 9.48 billion euros from a restated figure of 8.71 billion euros, boosted by the integration of Monsanto, which offset weakness in the pharmaceuticals and consumer-health segments.