Business Essentials for Professionals


$2 Billion Award In Roundup Trial Against Bayer In US, Shares Fall

$2 Billion Award In Roundup Trial Against Bayer In US, Shares Fall
Upholding the allegations against Bauer’s Roundup weed killer being a cause of cancer, the largest U.S. jury verdict against the company – over $2 billion to a California couple was awarded by a jury, which sent the shares of company dropping by as much as 5 per cent.
That threatened the stock to touch its lowest level in almost seven years. The fall happened despite the high chance of the amount of fines compensation for damages being reduced due to the Supreme Court ruling of limiting ratio of punitive to compensatory damages to 9:1.
After concluding that the design of Roundup - based on herbicide glyphosate - had been defective and that no warning of the herbicide's alleged cancer risk was issued by the company, total punitive damages at US$2 billion was set by the jury in addition to $55 million in compensatory pay.
The verdict point was disappointing and would be appealed against, Bayer said in a statement on Monday. The jury's decision was called "excessive and unjustifiable" by a spokesman of the company.
In relation to cases over the chemical, that was acquired by Bayer along with its $63 billion deal for of Monsanto last year, there has so far been third consecutive jury verdict in the US against the company.
"Clearly we anticipate that much of the punitive damages of US$2 billion would likely be significantly reduced on appeal," JP Morgan analysts said in a note.
"However, the level of compensatory damages is still likely to be somewhat of a concern to the market given the level is above the Hardeman case," they added, referring to $5 million in compensatory damages awarded to a plaintiff in a previous case.
While a complete picture would be available only by the middle of 20202 as more cases are decided and a couple of appeal decisions being heard, the valuation of the company has been slashed by 5 billion euros ($5.6 billion) because of the litigations, the brokerage firm said.
The issue of the herbicide's alleged cancer risk is at the centre of U.S. lawsuits from more than 13,400 plaintiffs against Bayer. Since the first jury verdict last August, after shedding about 40 billion euros, the group's market value has fallen below what Bayer paid for Monsanto.
The company claims that glyphosate was safe to use for humans was reaffirmed this month by the U.S. Environmental Protection Agency while the chemical has been ruled not to possess carcinogenic hazards to humans by the European Chemicals Agency and other regulators across the world.
However, probability of the of the chemical causing cancer was affirmed in 2015 by the World Health Organization's International Agency for Research on Cancer.
Bayer has claimed that the demand for its glyphosate-based herbicides has been strong in the US from lawn and garden owners and therefore there has been no impact on demand because of the litigations. The company added that the weather was the driver for the string demand for the herbicides.
While referring to an French investigation against Monsanto for compiling files of influential people such as journalists and scientists in France, Bayer also suggested wider problems for Monsanto after is confirmed that the company would have followed the same strategy across Europe.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc