Bayer to Pay US$289 Million Following Monsanto Lawsuit

Heads turned when a deal years in the making was finally allowed by the European Union (EU), but now investors are starting to show concern.

On Monday (August 13), global pharmaceutical, farm chemicals and materials company Bayer (OTCPINK:BAYRY, ETR:BAYN) was ordered to pay US$289 million for a Monsanto lawsuit, blaming the company for not warning users of a link between its pesticide and cancer.

This is the first of more than five thousand similar lawsuits with Monsanto, which was acquired by Bayer in June 2018.

Bayer’s share price decreased 11.30 percent to US$23.58 as of market close Monday following the announcement.

The acquisition began nearly two years ago when the two companies first announced a definitive merger agreement on September 14, 2016. From there, the time spent between June when the deal was finally closed, awaited approvals from countries and regulatory agencies alike.

Many of these approvals were set with conditions, including with South Africa. The country’s Competition Commission required Bayer to sell two related Liberty brands which competed with Monsanto’s pesticide products.

Gaining EU-approval for the acquisition was another big hurdle Bayer was working since the 2016 acquisition announcement. The EU approval was announced in late March 2018—also with conditions—and eventually the US followed suit allowing US$63 billion acquisition, or US$128.00 per share.

The current lawsuit against Monsanto was from Dewayne Johnson, a California groundskeeper diagnosed with non-Hodgkin’s lymphoma claiming the most popular pesticide Roundup gave him the cancer, as reported by CNN.

While this trial is among thousands, it was first in trial due to Johnson’s terminal illness; in California, dying plaintiffs are granted expedited trials. The US$289 million consists of US$250 million in punitive damages and US$39 million in compensatory damages.

Johnson’s lawyer claims Monsanto’s scientists knew of the cancer risk since the 1970s, but failed to inform the public of the hazardous product.

Monsanto maintains its stance that the product does not cause cancer, and intends to appeal this jurisdiction. However, the company did face dangerous allegations last year in August regarding influencing research on the same weed killer.

Documents and internal emails had been leaked on the company inferring issues on the research which led Roundup to be a harmless product.

Investor takeaway

Though the company still faces thousands of similar litigations for Roundup, JP Morgan analyst Richard Vosser claims this jury verdict is “significantly overdone.”

Vosser believes there is potential for the verdict to be overturned on appeal and for the damage amount to be greatly reduced and maintains his “buy” rating on the company’s stock.

Aside from this worrying news for investors on the lawsuits, on August 1 Bayer received European Commission approval for the new treatment regime Eylea, allowing clinicians to combine proactive treatment with early extension of the injection interval for patients with neovascular age-related macular degeneration (nAMD).

Investors interested in these trials and other Bayer news are encouraged check on the company’s site for developing information.

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Securities Disclosure: I, Gabrielle Lakusta, hold no investment interest in any of the companies mentioned.