Bayer Battered After Suffering "Major Blow" From Second RoundUp Cancer-Trial Loss

Bayer AG shares are down over 12% in European trading - the biggest drop since 2003 - after a U.S. jury found the RoundUp weed killer was a substantial factor in a California man's cancer. This is the second case that has gone against manufacturer Monsanto, acquired by Bayer last year.

On Tuesday, a federal court jury in San Francisco ruled unanimously in a lawsuit against Monsanto. Attorneys say the trial, which will determine in a second phase whether the company is liable and if so, for how much, could help determine the fate of hundreds of similar lawsuits.

The plaintiff's attorneys said he developed non-Hodgkin lymphoma after 26 years of regularly using Roundup to tackle weeds and poison oak, according to the Wall Street Journal. The active ingredient in Roundup and Ranger Pro is glyphosate, a herbicide.

Hardeman’s case is considered a “bellwether” trial for hundreds of other plaintiffs in the US with similar claims, which means the verdict could affect future litigation and other cancer patients and families. Monsanto, now owned by the German pharmaceutical company Bayer, is facing more than 9,000 similar lawsuits across the US.

The decision strikes another blow to the German pharmaceuticals group. In August, a jury ordered its Monsanto unit to pay $289 millionafter determining it failed to warn customers of the potential cancer risks of two of its weedkillers, Roundup and Ranger Pro. The verdict was cut to $78.5 million on appeal.

Analysts are broadly negative on the news, BUT appear to be buyers of any dip... and today's a big dip.

News is a “major blow,” according to Baader (buy, PT EU123), which says Bayer shares might move towards EU60 in the short-term. If stock falls toward 2018 lows, probability of Bayer becoming a target for activists or a takeover will increase.

Morgan Stanley (overweight, PT EU82) says there was “budding enthusiasm” among investors for either a potential “surprise” verdict in favor, or a hung jury, given multiple days elapsing during deliberations.

Overhang on Bayer shares “could be significant” as outcome was considered by some investors to be a potential bellwether for ~765 outstanding glyphosate cases, Goldman Sachs analyst Keyur Parekh (buy, PT EU78) writes.

Citi says “steady heads required” as >EU20b of litigation risk is already priced into the shares. Says legal checks instruct bank to be more focused on the upcoming Hall vs Monsanto trial being held in St Louis from April 1. St Louis result will better determine whether the estimate of a potential settlement liability of $1-6b needs to be refined

Any extreme weakness is an opportunity to buy, according to Bernstein (outperform, PT EU86) as an ultimate liability well above the $5b is already “baked-in”

Monsanto says studies have established that Roundup's active ingredient, glyphosate, is safe. It has appealed a separate U.S. court decision last year in favor of a man who used Roundup.

"We are disappointed with the jury's initial decision, but we continue to believe firmly that the science confirms that glyphosate-based herbicides do not cause cancer," Bayer said in a press release.

"Bayer stands behind these products and will vigorously defend them."