Bayer shares plunge after$289m US court fine over Roundup

SHARES of Bayer AG plunged by the most in almost seven years as investors weighed the potential costs of a protracted legal battle over Roundup weed killer, the cornerstone product of newly acquired Monsanto. Monsanto was socked with $289 million (R4.06 billion) in damages in the first trial over claims that the herbicide causes cancer, when a former school grounds keeper prevailed on Friday in the San Francisco state court.

The trial was an important test of the evidence against Monsanto and will serve as a template for litigating thousands of other claims over the herbicide. Bayer closed a deal to buy Monsanto for $66bn in June. If the litigation generates large verdicts against the agricultural company, it could have a material impact on Bayer’s bottom line, said Chris Perrella, an analyst.

The verdict came as a surprise, and may stir memories for some Bayer investors of the scandal over cholesterol-lowering pill Lipobay, said Markus Mayer, an analyst with Baader Bank. The company paid more than $1.1bn to settle suits over the heart drug.

“Investors might worry that this will become a ‘Lipobay 2.0’,” Mayer said.

Shares of Bayer slumped as much as 12 percent, the most since September 2011, in Frankfurt yesterday. That extended its rout this year to 19 percent.

The “decision does not change the fact that more than 800 scientific studies and reviews – and conclusions by the US Environmental Protection Agency, the US National Institutes of Health and regulatory authorities around the world – support the fact that glyphosate does not cause cancer, and did not cause Mr Johnson’s cancer,” Monsanto vice president Scott Partridge said in a statement on Friday.

Since Roundup is ubiquitous in modern farming, there’s a “huge potential liability,” though it’s very uncertain it will materialise, Perrella said. Bayer investors might not be aware of the risks, because many analysts covering the company focus on pharmaceuticals, he said.

Glyphosate, the main ingredient in Roundup, was first approved for use in Monsanto’s weed killer in 1974. Hotly debated