Bayer’s Roundup Costs Could Top $16 Billion as Provisions Mount
Bayer to Set Aside $4.5 Billion for Potential Roundup Claims
(Bloomberg) -- Bayer AG will set aside an additional $4.5 billion to deal with lawsuits tied to its best-selling Roundup weedkiller, which will be pulled from the U.S. consumer market in its current form in 2023.
The provision, taken in the second quarter, comes on top of the $11.6 billion that Bayer has previously pledged to fight and settle the Roundup litigation. It lifts beyond $16 billion the potential costs of a legal saga that dates to the 2018 acquisition of Monsanto Co., the maker of the herbicide.
“This should remove uncertainty and ambiguity that’s been weighing on the company,” Chief Executive Officer Werner Baumann said on a call with investors. That will allow shareholders to focus on Bayer’s performance and the quality of its business units, he said.
Bayer shares rose 1.3% to 51.16 euros in Frankfurt.
The German drugs and chemicals giant has repeatedly failed to put the Roundup woes behind it. Bayer inherited the legal nightmare with $63 billion Monsanto takeover, a deal spearheaded by Baumann early in his tenure as CEO. The purchase closed just weeks before the first of three U.S. juries found that Roundup had caused cancer.
Bayer’s three losses in U.S. trial courts only intensified the surge of suits against it concerning Roundup, wiping tens of billions of dollars from the company’s market valuation and raising the prospect that its business model -- yoking pharmaceuticals, agriculture and consumer health -- could be broken up.
The announcement on Thursday marks an update to the company’s “five-point” plan, released in May, for handling future litigation tied to the weedkiller -- which Bayer insists is safe. The company developed the plan after twice failing to convince a U.S. federal judge to accept a framework for handling future Roundup suits. The first, outlined last summer, involved setting aside $1.25 billion, a figure Bayer later increased to $2 billion. Neither framework was deemed acceptable.
Now, Bayer’s preferred path involves appealing to the Supreme Court the case of Edwin Hardeman, who testified that his years of use of Roundup in California caused non-Hodgkin’s lymphoma. The jurors awarded him more than $80 million, which was later cut by the U.S. federal trial judge to $25 million.
In May, the U.S. Court of Appeals in San Francisco refused to overturn that 2019 decision. Bayer contended that the U.S. Environmental Protection Agency’s authority to regulate herbicide labeling prohibits states from imposing demands that depart from federal requirements. The company said the verdict was improperly based on a California law requiring Bayer to warn consumers of Roundup’s cancer risk. The EPA supported Bayer’s appeal.
The $4.5 billion in provisions won’t be needed if Bayer wins the Supreme Court appeal, which would “effectively end” the legal troubles, the company said. Still, Bayer acknowledged Thursday that its “base case” going forward is the scenario that involves using the extra funds.
“We believe that the U.S. Supreme Court should give strong consideration to accepting our petition to review” the case “and render a positive ruling,” Baumann told investors.
The Supreme Court takes on fewer than 5% of appeal requests, according to Elizabeth Burch, a law professor at the University of Georgia who teaches about mass-tort cases. Beyond that, the court issued a ruling in 2005 that appears to conflict with Bayer’s argument.
“They would have to overturn their own previous ruling for Bayer to win,” Burch said. “I think it’s a longshot.”
Bayer has decided to remove glyphosate, the active ingredient in Roundup, from the consumer market in 2023. The new version of the weedkiller will rely on “alternative active ingredients,” and will need EPA approval, Bayer said. The move is to “manage litigation risk” and not because of safety concerns, the company said.
Non-Hodgkin’s lymphoma has a long latency period, Burch said. So while the company can cut off some future cancer claims tied to the substance, they’ll still be dealing with Roundup cases for some time, she added.
“They won’t be finished with these Roundup cases for at least 10-15 years,” Burch estimated.
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