German agricultural and pharmaceutical giant Bayer AG saw its shares decline in European trading after a Georgia jury ordered the company to pay $2.1 billion in damages. The verdict was issued in favor of John Barnes, who claimed that Bayer's glyphosate-based herbicide, Roundup, caused his cancer. Barnes filed the lawsuit against Monsanto, a company Bayer acquired in 2018, citing that the herbicide led to his non-Hodgkin lymphoma.
This legal setback adds to Bayer's ongoing challenges since acquiring Monsanto, as glyphosate, the key ingredient in Roundup, has been controversial for its alleged carcinogenic effects. Bayer has already allocated over $16 billion to settle related lawsuits. The company plans to appeal the recent verdict, arguing that it contradicts scientific evidence and regulatory consensus worldwide. Bayer believes it has strong grounds for overturning the decision on appeal.
Goldman Sachs analysts, including James Quigley and Rajan Sharma, noted that this is the first such case in Georgia, and compensation amounts typically decrease upon appeal. Bayer intends to challenge the ruling, reminding stakeholders that provisions for glyphosate-related litigation stand at $5.9 billion through the end of 2024.
Bayer is also engaging with U.S. policymakers regarding labeling regulations. Georgia's state legislature recently passed a Senate bill ensuring that any pesticide registered with the EPA and sold with compliant labeling meets state warning requirements. Bayer hopes this will prevent similar lawsuits from proceeding in court based on state regulations.
Additionally, Bayer has been granted an extension to bring the Johnson case to the U.S. Supreme Court, now due by April 2025. Analysts remain cautiously optimistic about the potential positive risk/reward factors in this high court proceeding, anticipating a final outcome by the end of the 2025/26 term.
Goldman Sachs maintains a "neutral" rating on Bayer's stock, with a 12-month target price of €28, citing uncertainties in Bayer's R&D pipeline and the negative impact of ongoing litigation. Bayer's stock fell approximately 5% in European trading, reaching its lowest level since 2004.
