Bayer to Set Apart $4.5 Billion for Potential Roundup Claims

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Bayer AG will provide an additional $ 4.5 billion to process lawsuits related to its best-selling herbicide Roundup, which will be withdrawn from the U.S. consumer market in its current form in 2023.

The provision made in the second quarter is in addition to the $ 11.6 billion Bayer previously pledged to fight and resolve the Roundup litigation. It raises the potential cost of a legal saga to over $ 16 billion, which extends to the 2018 acquisition of Monsanto Co., the maker of the herbicide.

“This is intended to remove uncertainty and ambiguity that burden the company,” said CEO Werner Baumann in a conversation with investors. This will allow shareholders to focus on Bayer’s performance and the quality of the businesses, he said.

Bayer shares in Frankfurt rose 1.3% to EUR 51.16.

The German drug and chemical giant has repeatedly failed to leave Roundup’s problems behind. Bayer inherited the legal nightmare with the $ 63 billion acquisition of Monsanto, a deal spearheaded by Baumann early in his tenure as CEO. The purchase was completed just weeks before the first of three U.S. juries found Roundup caused cancer.

Bayer’s three losses in U.S. courts have only exacerbated the wave of lawsuits against Roundup, wiping billions of dollars off the company’s market valuation and increasing the prospect that its business model – pharmaceuticals, agriculture and consumer health – could be subjugated.

Thursday’s announcement marks an update to the company’s “five-point plan” released in May for handling future litigation related to the weedkiller – which Bayer insists is safe. The company developed the plan after failing twice to convince a U.S. federal judge to accept a framework for handling future Roundup lawsuits. The first, outlined last summer, involved providing $ 1.25 billion, a number Bayer later increased to $ 2 billion. None of the frames were found acceptable.

Bayer’s preferred route now is to take the Edwin Hardeman case to the Supreme Court, which stated that his years of use of Roundup in California caused non-Hodgkin lymphoma. The jury paid him more than $ 80 million, which was later reduced to $ 25 million by the US federal judge.

In May, the U.S. Court of Appeals in San Francisco refused to overturn that 2019 ruling. Bayer alleged that the U.S. Environmental Protection Agency’s power to regulate herbicide labeling prohibits states from making demands that deviate from federal regulations. The judgment is wrongly based on a California law that requires Bayer to warn consumers of Roundup’s cancer risk. The EPA supported Bayer’s appeal.

The $ 4.5 billion provision will not be needed if Bayer wins the Supreme Court appeal, which would “effectively end” the legal issues, the company said. However, Bayer admitted Thursday that its future “base case” is the scenario where the additional funds will be used.

“We believe the US Supreme Court should strongly consider accepting our motion to review” the case “and deliver a positive judgment,” Baumann told investors.

According to Elizabeth Burch, a law professor at the University of Georgia who teaches on mass crime cases, the Supreme Court takes less than 5% of appeals. In addition, the court passed a judgment in 2005 that appears to contradict Bayer’s reasoning.

“You would have to overturn your own previous decision for Bayer to win,” said Burch. “I think it’s a long shot.”

Bayer has decided to take glyphosate, the active ingredient in Roundup, off the consumer market in 2023. The new version of the herbicide will be based on “alternative agents” and will require EPA approval, Bayer said. The move is intended to “manage the risk of litigation” and not out of security concerns, the company said.

Non-Hodgkin lymphoma has a long latency period, Burch said. While the company may trim some future cancer claims related to the substance, they will still be looking at Roundup cases for some time, she added.

“They’ll be through these round-ups for at least 10-15 years,” Burch estimates.