Bayer shares slump as US judge upholds herbicide verdict

Tom Brown

23-Oct-2018

LONDON (ICIS)–The value of Bayer shares dropped by more than  8% on Tuesday after a US judge affirmed a jury verdict that the company’s Roundup weed killer is carcinogenic.

A San Francisco Superior Court judge moved to cut damages awarded to Dewayne Johnson, a groundskeeper who claims that exposure to Roundup resulted in his developing cancer, to a total of $78m.

The earlier judgement had awarded $39m in compensatory damages and $250m in punitive damages.

News earlier this month that Bayer had won a ruling expected to slash the compensation awarded and potentially begin a new trial on the matter had raised investor expectations that the verdict tying Roundup to cancer could be thrown out.

Bayer had attacked the scientific basis for the plaintiff’s claim, but the latest verdict stated that there was no ground on which to overturn the original ruling.

“There is no legal basis to disturb the jury’s determination that [the] plaintiff’s exposure to GBHs [glyphosate-based herbicides] was a substantial factor in causing his NHL [Non-Hodgkin Lymphoma],” the court said in a verdict filed on Monday.

Although the new compensation award is a substantial reduction on the original verdict, it is at the top of the $40m-80m range anticipated by analyst Bernstein, and a negative for Bayer’s stock.

The punitive damages are understood to be contingent on Johnson accepting the offer by 9 December this year or a new trial could take place, but this would likely be focused on the extent of damages to be awarded rather than the link between Roundup and cancer.

With the new verdict stating that there was sufficient scientific evidence to support Johnson’s claim, the ruling could have implications for future trials, with a reported 5,000 other plaintiffs across the US claiming a link between Roundup and cancer.

Many of those cases have been grouped into multidistrict litigations – a method of streamlining complex or multi-plaintiff cases in the US – and Bayer’s capacity to deal with the lawsuits will be a key factor in its stock performance, according to Bernstein.

“Positive progress and a resolution of glyphosate-related litigation remains the key catalyst for the stock outperforming in the short term,” the researcher said.

Bayer called the decision to cut the compensation amount “a step in the right direction”, but stated that the verdict of liability is not supported by the evidence, citing an Environmental Protection Agency cancer risk assessment that concluded that glyphosates are unlikely to cause cancer in humans.

The company plans to appeal the verdict, it added.

“There is an extensive body of research on glyphosate and glyphosate-based herbicides, including more than 800 rigorous registration studies required by EPA, European and other regulators, that confirms that these products are safe when used as directed,” Bayer said in an emailed statement.

Bayer acquired Monsanto’s portfolio of crop treatment products when it purchased the company for $63bn earlier this year, retiring the century-old brand name in the process.

(adds Bayer commentary and further detail in closing paragraphs)

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