By Ludwig Burger
FRANKFURT (Reuters) -Bayer shares dropped as much as 5% on Thursday after a U.S. judge rejected its plan to try and limit the cost of future class action claims that its Roundup weedkiller causes cancer.
The German group called into question the future sale of glyphosate-based products to gardeners in the U.S., and said it would review plans to settle around 30,000 legal claims, after the judge called Bayer (DE:BAYGN)'s plan to end years of litigation "unreasonable" on Wednesday.
"We will continue to assess financial risks as we move forward," finance chief Wolfgang Nickl said in an analyst call, when asked if the estimate of the potential financial burden had been revised.
Bayer will be spared payouts related to future cases it had outlined in its plan this year and next but will continue to set aside $2 billion for the risk of further claims, reflecting its view that there were no fundamental changes in the outlook.
Investors were less optimistic, with shares falling as much as 5.3% and trading 4% lower at 1044 GMT.
"This ruling will keep a Damocles sword on Bayer," even as demand for seeds and farming pesticides recovers, analysts at brokerage Bryan Garnier said.
BACK TO COURT
Bayer's top litigation lawyer William Dodero said the group would ask the U.S. Supreme Court to quash defeats suffered in jury trials and appellate courts which came despite the product being deemed safe by the U.S. Environmental Protection Agency.
Specifically, Bayer will ask for a review of rulings that went in favour of Roundup user Edwin Hardeman, with the top court likely to decide whether to grant the request by early winter and a final verdict expected around the middle of next year, Dodero said.
“It simply can’t be right that a manufacturer that’s followed the science and all applicable regulations is being held liable,” Dodero said on how he will argue his case.
Markus Manns, a fund manager at Union Investment, which holds Bayer shares, said the focus had turned to whether the Supreme Court will allow the review.
About 125,000 people have alleged Roundup caused their non-Hodgkin lymphoma and cases involving 96,000 of those have been resolved with a $9.6 billion settlement which also included provisions for the remaining claims.
Three cases have gone to trial and in each one, juries awarded tens of millions of dollars in damages for plaintiffs.
"We are determined to resolve the Roundup litigation and minimise the risk to our company from the existing and potential future lawsuits," said Bayer Chief Executive Werner Baumann.
"We remain open to settlement negotiations on the remaining lawsuits, as long as the terms are reasonable. However, we will review this approach in the future," he added.
REVIEW OF RESIDENTIAL USE
U.S. District Judge Vince Chhabria in San Francisco rejected as "unreasonable" Bayer's class action proposal, which would have provided compensation in return for placing limits on lawsuits.
Bayer acquired Roundup with its $63 billion purchase of Monsanto (NYSE:MON) in 2018.
Announcing a new plan after the ruling, Bayer said it "will immediately engage with partners to discuss the future of glyphosate-based products in the U.S. residential market," which accounts for most cancer claims.
Bayer said that market segment was worth about 300 million euros in annual sales and one option included using a different active ingredient in Roundup, while no changes were foreseen for agricultural users.
Demand for the herbicide has remained robust throughout the litigation, Bayer added.