Bayer acknowledged for the first time that lawsuits related to the controversial weed killer Roundup may force it to sell assets, issue new equity or borrow money at unfavorable terms.
"We may incur considerable financial disadvantages from the pending lawsuits or potential future cases if, for example, we are ordered to pay compensatory and possibly punitive damages," Bayer said in its annual report, "or if we assume payment obligations under out-of-court settlements."
It's unlikely that Bayer will have to raise a large amount of money to handle a possible resolution, Chief Financial Officer Wolfgang Nickl said in an interview Thursday, Feb. 27.
Bayer inherited the mountain of litigation in its $63 billion takeover of Monsanto two years ago, which has battered its share price and led investors to question the acquisition's rationale. The stock fell as much as 2.8% in Frankfurt trading Thursday.
"Bayer has to cover itself in all directions," Markus Mayer, an analyst at Baader Bank, said by email.
The company is working to settle claims that Roundup, a powerful herbicide, causes cancer. The ranks of new people alleging that appears to be leveling off: Bayer is now facing 48,600 U.S. plaintiffs, up from 42,700 in October, the company said as it reported full-year earnings. A surge could have derailed the settlement talks.
"The number of cases is a real problem in getting the litigation resolved," Brent Wisner, a lawyer for some of the plaintiffs, said in an email before Bayer provided updated figures. "If we cannot make a deal very soon, this whole settlement process will fall apart."
In July, Bayer reported lawsuits from 18,400 plaintiffs linking Roundup to cancer — a figure that by October had more than doubled. Last month, the mediator handling settlement negotiations said that the volume of cases at the heart of the talks may have increased beyond 85,000. Bayer called the figure "speculative," and has instead focused on the number of cases that have already been served.
Baader Bank's Mayer expects a settlement before the next shareholder meeting at the end of April.
The company's growth forecast for this year fell short of estimates. Core earnings per share will probably increase to between 7 euros and 7.20 euros in 2020, Bayer said in a statement. That compares with an average estimate of 7.34 euros from analysts surveyed by Bloomberg.s
After Chairman Werner Wenning announced his retirement Wednesday, Chief Executive Officer Werner Baumann will be called on more than ever to steer the German giant out of the Roundup crisis — and prove to skeptics that Bayer's dual focus on health care and farming makes sense.
While crop science has hogged the spotlight, Bayer increasingly needs to show a path forward for the pharmaceuticals division that in coming years will lose big sales as blockbusters Xarelto and Eylea come off patents.
Bayer says Roundup is safe and doesn't cause cancer, and it got the backing of the U.S. Environmental Protection Agency last month.
Roundup isn't Bayer's only legal problem. Another herbicide inherited from Monsanto, dicamba, creates another potentially multibillion-dollar headache for the Leverkusen, Germany-based company.
About 170 plaintiffs in the U.S. had sued Bayer and rival BASF over dicamba as of Feb. 6, Bayer said Thursday. Plaintiffs allege the chemical drifted onto crops that weren't engineered to resist it. The companies lost the first U.S. trial over the chemical earlier this month with a $265 million jury award. Bayer is appealing.