The top management of the Leverkusen-based pharmaceutical company Bayer should not have had too high hopes for a legal liberation anyway. Now there is certainty: On Tuesday morning local time, the US Supreme Court announced that it would not rehear the case of a US plaintiff with cancer who blames Roundup for his illness.
The Bayer group, which wanted to have the case reopened, was finally rebuffed before the Supreme Court. For the Leverkusen-based company, this also means that the end of the lawsuits that the group has received with the takeover of the US seed company Monsanto is a long way off.
The Leverkusen group was correspondingly disappointed with the rejection from Washington: “The decision undermines the reliability of regulatory decisions for companies because it allows each individual state in the USA to require different instructions for use,” said a spokesman.
In addition, the US government is doing a legal U-turn. The move away from science-based regulation is also met with criticism in the United States and “could exacerbate the food crisis in difficult times.” The group’s shares collapsed by around two percent immediately after the announcement from Washington.
Another setback – the takeover of Monsanto, which CEO Werner Baumann engineered shortly after taking office in 2016, was originally intended to be the big hit for Bayer. As a result of the multi-billion dollar deal, the group rose to become the world’s number one in the seed and crop protection product business.
Inspired by the “logic of the deal”, Baumann promised his shareholders a significant increase in value. Instead, the share price has since fallen by a good half under the flood of lawsuits. Many investors therefore still accuse the management of massively underestimating the legal risks of the takeover.
The case of pensioner Edwin Hardeman, who is suffering from cancer, in which Bayer has now finally been found guilty after the Supreme Court’s rejection, is one of the first major lawsuits that the German company was confronted with after the takeover of Monsanto. Hardeman and with him many thousands of other cancer patients in the USA attribute their illness to years of use of the glyphosate weed killer “Roundup”. Bayer denies the allegations and points out that supervisory authorities worldwide have checked the product and classified it as harmless.
Bayer has received a total of 138,000 Roundup product lawsuits in recent years, and the group has already settled a good 108,000 cases. But an end to the flood of lawsuits is still not in sight. Fund manager Markus Manns from Union Investment expects “further possible lawsuits about the weed killer glyphosate in the USA”. The fund company is one of the 20 largest shareholders in the group.
However, the defeat before the Supreme Court did not come as a complete surprise to Bayer. The group prepared a five-point plan last year to keep the number of future lawsuits as small as possible. Among other things, it provides for damages payments for certain plaintiffs. For this purpose, Bayer had increased the existing provisions for future lawsuits by a further 4.5 billion dollars, the equivalent of around 3.8 billion euros. “This covers a potential long-term financial risk and in the event of a positive decision by the Supreme Court, the financial situation would be significantly better,” Bayer said at the time.
In order to further reduce the risk of future lawsuits, the group also wants to replace the glyphosate-containing products in the consumer market in the USA with new formulations without the active ingredient from 2023. “This step is solely due to the minimization of legal risks and does not reflect any security concerns in any way,” emphasizes the people in Leverkusen, referring to the voluntary nature of the program, which is ready to go at any time: “However, the decision on this depends on important developments in the legal complex, too which includes trials and appeals.”
In fact, the Hardeman case is not the only case Bayer has brought to the US Supreme Court. In March, the Leverkusen-based company also filed an application for revision before the Supreme Court in the case of a plaintiff couple with cancer, arguing, among other things, with the extremely high fine of two billion dollars, to which the group was initially sentenced.
And in the event that there are more conflicting rulings from US appeals courts, Bayer could try to have the Roundup case heard before the Supreme Court after all.
But even if the Supreme Court should actually accept one of these cases, that would not mean the end of the legal problems surrounding the takeover. Because lawsuits are still pending for other Monsanto products. In Germany, investors also accuse Bayer of violating capital market laws in the Monsanto takeover and are demanding around two billion euros in damages.
It was again evident in the spring of this year that Bayer also faces significant risks from the takeover outside of Roundup. In March, the Californian metropolis of Los Angeles filed a lawsuit against Bayer and two other companies. The accusation: Monsanto is said to have discharged the environmentally harmful and possibly carcinogenic chlorine compound polychlorinated biphenyls (PCB) into rivers until the chemical was banned in the USA in 1979.
Back in 2020, Bayer agreed to a $650 million PCB settlement with around 2,500 cities and counties that took effect in March of this year. However, Los Angeles had dropped out of this process shortly beforehand in order to be able to pursue its own legal recourse. Bayer has already announced that it intends to “continue to vigorously defend itself” in these and other pending lawsuits, including numerous private lawsuits.
The weed killer Dicamba from Monsanto also continues to cause legal problems for Bayer. Last December, the US Environmental Protection Agency (EPA) announced that it would evaluate the herbicide to determine whether it poses unreasonable risks to crops. Even before the announcement by the US authorities, Bayer had to deal with lawsuits from farmers against dicamba, because the drug had been blown away from other fields, allegedly damaging parts of the crop. According to the company’s report, Bayer has “reached an agreement to settle the cases” in some cases and has accrued $300 million in reserves for the dicamba lawsuits.
And it’s not just in the United States that Bayer is threatened with trouble. The pharmaceutical group is also facing lawsuits in Germany over the takeover of the agricultural group Monsanto. In contrast to the USA, however, this is not about the controversial weed killer glyphosate, but rather the question of whether the Leverkusen-based company should have informed its shareholders and the capital market earlier about the risk of legal action in the USA.
Due to the possible violation of ad hoc obligations, the law firm Tilp is representing 288 institutional investors as well as private investors. The law firm put the amount of damages at around two billion euros. The court has not yet commented on whether and when the lawsuits will be admitted to the Cologne Regional Court.
The decisive factor will now be how much the company’s strategy actually catches on gradually leaving the chapter of the Monsanto lawsuits behind. In the pharmaceuticals business in particular, Bayer has recently been able to score with a series of good news, several analysts have recently raised their price targets for the share. But there are also numerous investors who, disappointed by the weak performance of the past few years, continue to call for the group to be split up. Such demands receive a tailwind above all from the lack of synergies between the divisions and from the general stock market trend towards group split-ups.
That also means: Even if Baumann quickly gets the complaints about the Monsanto products under control – the next major construction site is already waiting.
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