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Setback: Bayer Shares Collapse: US Government Takes Position Against Bayer in Glyphosate Dispute | news

On Tuesday (local time) the US government advised the Supreme Court against accepting a historic case. The government is represented by the so-called attorney general before the highest court in the country. The procedure could have a signal effect for many other causes in the United States. On this hinges legal risks for billions of dollars for the Leverkusen group.

This means that the best possible scenario for Bayer is probably out of the question, British Barclays Bank analyst Emily Field explained in an initial assessment. However, Bayer had already made arrangements for such a case with provisions last year. The renewed uncertainty weighed heavily on the stock on Wednesday.

In particular, the Solicitor General’s current decision concerns the revision of a ruling in favor of actor Edwin Hardeman. He blames US manufacturer Monsanto’s glyphosate-containing products, which Bayer has detected, for his cancer. In 2019, after a court case, he was awarded a whopping 25 million dollars in damages. Bayer hopes the Supreme Court will overturn the decision.

However, it is still unclear whether the US Supreme Court will handle the case. In December, the judges announced that they would seek the US government’s opinion on what initially appeared to be a sign of interest and therefore positive for Bayer. But now the recommendation of the Ministry of Justice is available: he takes the side of the actor. The government disagreed with Bayer’s argument that federal law prevents damage claims in individual US states.

“We continue to believe that there are good legal reasons for the Supreme Court to review the Hardeman case and correct the verdict,” Bayer said in a statement. This was also confirmed by numerous statements that had been submitted to the court. For example, the US Environmental Protection Agency (EPA) has repeatedly stated that glyphosate-based herbicides can be used safely and are not carcinogenic.

“We always knew the law was on our side, and now the government is in agreement,” plaintiff Hardeman’s attorney Jennifer Moore told US media. “It’s a great day for cancer victims in this country who are trying to hold abusers like Monsanto accountable.” Hardeman was diagnosed with lymph node cancer in 2015. He accuses Monsanto and Bayer of hiding the alleged health risks of glyphosate.

The group denies the allegations and argues with studies that aim to show that products containing glyphosate are harmless when used as directed. The numerous lawsuits Bayer is facing in the United States are based in particular on an assessment by the World Health Organization’s International Agency for Research on Cancer. In 2015, it classified Monsanto’s herbicide as “possibly carcinogenic” to humans.

In the appeal to the Supreme Court, Bayer had argued with the so-called Federal Preemption. As a result, the company believes that damages claims for allegedly inadequate cancer risk warnings cannot exist under state law if they conflict with federal law. Furthermore, the Panel is of the view that the admission of experts as witnesses for the plaintiffs did not meet federal standards in the trial.

In the event that the Supreme Court does not want to deal with the glyphosate case or finally decides against Bayer, the company had made additional provisions of $ 4.5 billion in the summer. The money would then be used to set up a schedule to address new applicants over the next 15 years.

Although the US government’s decision is a setback for Bayer, it will have no financial consequences, at least for the time being, said analyst Richard Vosser of US bank JPMorgan in a study ahead of the provisions. Together with the unused remainder of the previous provisions, it should be sufficient to cover approximately 31,000 existing cases and approximately 100,000 future cases over a 10-15 year horizon. The expert also recalled that Bayer plans to replace glyphosate as an active ingredient in Roundup herbicide for private customers in the United States soon. Since 90 percent of the lawsuits to date come from private individuals, the legal risk would be significantly reduced.

If the US Supreme Court does not review the Hardemann case, Bayer can at least hope to some extent for another case it wants to bring before the Supreme Court. It concerns the cancers of plaintiffs Alberta and Alva Pilliod, who ultimately received $ 86.7 million in damages and penalties. Bayer addressed Roundup glyphosate herbicide issues in 2018 with Monsanto’s $ 60 billion purchase.

Here’s how the Bayer stock reacts

Bad news about billions worth of glyphosate lawsuits caused a new steep drop in Bayer shares. The share price fell Wednesday, causing the rear of the DAX to rise further stabilized by 6.22 percent to EUR 58.04.

In the herbicide lawsuit, the US government overnight advised the Supreme Court – the highest court in the country – not to accept a historical case. The lawsuit could serve as a signal for many other lawsuits in the United States for alleged cancer risks from glyphosate.

Jefferies analyst Charlie Bentley wrote that it was a blow to the pharmaceutical and agrochemical company that the US government was taking action against it. Previous indications from the US authorities gave the impression that a positive outcome was possible.

The day before, after strong quarterly data, the shares had been the best value in Dax with an increase of nearly five and a half percent. The weak phase since mid-April with a price loss of around 15 per cent seemed to have stopped. The mid-week price drop is now returning the stock to its mid-March level. After equities closed the overall strong 2021 stock market at under 2.4%, things are still going well in the weak stock year 2022: with a 23% rise, Bayer is still the strongest value in the Dax .

In light of the news, however, JPMorgan expert Richard Vosser spoke of a clear setback for trying to finally put a line under the glyphosate issue. Without a Supreme Court decision in Bayer’s favor, the litigation will further weigh on the valuation of the securities. Price losses of between five and ten percent are expected given the severe mood dampening. However, Vosser sees no immediate consequences for the financial perspective and its estimates.

The money Bayer has allocated to the lawsuit is expected to be sufficient to cover approximately 31,000 existing cases and approximately 100,000 future cases over a period of 10 to 15 years. The expert also recalled that Bayer plans to replace glyphosate as an active ingredient in Roundup herbicide for private customers in the United States soon. Since 90 percent of the lawsuits to date come from private individuals, the legal risk would be significantly reduced.

Bayer addressed Roundup glyphosate herbicide issues in 2018 with Monsanto’s $ 60 billion purchase. Losses since the first glyphosate ruling against Bayer in August 2018 are now back to 38%.

/ hbr / mis / lew / zb

WASHINGTON (dpa-AFX)

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