Investors suffering losses from Bayer’s Roundup legal woes are finally seeing a light at the end of the tunnel, as the German conglomerate is said to be nearing a final settlement that could put tens of thousands of lawsuits behind it.
Bayer has reached verbal agreements with a large proportion of about 125,000 U.S. plaintiffs who allege Roundup causes cancer as part of a $10 billion plan to end all legal claims around the weedkiller, Bloomberg reported, citing people familiar with the negotiations.
Wrapping up the legal battle at $10 billion would be a win for Bayer, as it has lost $30 billion in market value since the Monsanto buyout, through which it inherited Roundup.
“We have made progress in the Roundup mediation discussions,” Bayer said in a statement shared with FiercePharma. It declined to comment on detailed settlement outcomes or timing.
So far, Bayer has lost all three trials that ended with combined $191 million in damages, though the company is still fighting them in appeals court.
Bayer CEO Werner Baumann, who spearheaded the Monsanto deal, previously said the company would consider a settlement that is financially reasonable and allows it to continue to sell Roundup. According to Bloomberg, the deal grants Bayer that wish, and plaintiffs’ attorneys will stop launching new attacks or advertising for new clients against the product.
As of April, Bayer counted 52,500 total suits, while the 125,000 number represents all cases that include those being held in abeyance and haven’t been filed or served. The settlement, which hasn’t been officially signed and approved by a judge, will allocate $8 billion to resolve current cases, while another $2 billion could be saved for future suits, according to the newswire.
The Roundup lawsuits have hurt not only Bayer’s stock performance, but also investors’ confidence in management, leading to a rare no-confidence vote at last year’s annual shareholder meeting. This year, after showing multiple reports that concluded that Baumann’s exec team acted diligently in assessing the Monsanto deal and the Roundup legal risks, investors came around this year with about 92.6% votes in favor of ratifying management’s actions in 2019.
Once the Roundup problem is resolved, Baumann might face a new challenge. Bernstein analysts Wimal Kapadia and Gunther Zechmann previously outlined a multi-step plan for Bayer to improve on its business, with suggestions including better communication with investors and settling the Roundup suits—advice the company now appears to have followed.
It has also started to address the pharma patent cliff by channeling resources to outside collaborations and M&A, having recently taken full control of Loxo Oncology’s tumor-agnostic drug Vitrakvi.
But eventually, the Bernstein analysts, who arguably spoke for many investors, want to see a split-up between the crop and pharma segments even as the company divests its animal health unit.
“We struggle to see major synergies between the two divisions,” they said in an investor note last year. “Yes, they are both ‘research’ focused, but we suspect the overlap and tech transfer are minimal and provides no competitive advantage to peers.”