Bayer Agrees to $10 Billion Settlement Over Monsanto's Roundup Lawsuits Following Disastrous $63 Billion Acquisition

Pharmaceutical Network, May 28 – On May 25 local time, Bloomberg reported that Bayer had reached a verbal agreement with approximately 125,000 U.S. plaintiffs to resolve all litigation related to Roundup, the herbicide acquired through its purchase of Monsanto. Reportedly, Bayer has set aside $10 billion for this settlement, with $8 billion allocated to address current cases and $2 billion reserved for future related claims.

 

Prior to Bayer, Teva Pharmaceuticals spent $23 billion to resolve opioid-related lawsuits across U.S. states. Going further back, in 2007, Merck & Co. agreed to pay $4.85 billion to settle claims related to its arthritis painkiller Vioxx.HeartDisease onset and otherDiseasethousands of product liability lawsuits. The Bayer-Monsanto herbicide case may become the second-largest settlement in the history of the pharmaceutical industry.

 

 

This settlement agreement signals a potential end to the litigation that has plagued Bayer, the century-old pharmaceutical giant, for the past two years. Under the terms of the agreement, each plaintiff will receive an average settlement of $64,000. Bayer will thus pay a price far exceeding $10 billion for its acquisition decisions. As of April this year, Bayer had resolved a total of 52,500 lawsuits.

 

In fact, Bayer’s acquisition of Monsanto was rated by FiercePharma as the most failed deal since 2010. Reportedly, before the transaction began, Monsanto primarily operated in genetically modified crop seeds and pesticides, holding a strong market position in the United States. After Bayer confirmed the acquisition, Monsanto repeatedly raised its price, making the transaction process quite arduous; it took nearly two years to complete the merger, with the total transaction amount reaching $63 billion.

 

Following the completion of the acquisition, sales in Bayer’s Crop Science division more than doubled year-on-year in the fourth quarter of 2018, reaching $5.16 billion and becoming one of the company’s core businesses. However, at that very time, Monsanto’s herbicide Roundup was found to be potentially carcinogenic, leading to lawsuits filed by tens of thousands of plaintiffs.

 

Despite Bayer’s repeated assurances regarding the product’s safety in an effort to extricate itself from this boundless quagmire of litigation, the plaintiffs remain unconvinced. To date, Bayer has lost several cases adjudicated by U.S. courts, with total compensation amounts reaching millions of dollars.

 

Moreover, the severe repercussions of the Monsanto incident significantly undermined market confidence, causing Bayer’s stock price to plummet by 40% from its peak in May 2018, with a total market capitalization loss exceeding $40 billion. If this downward trend cannot be reversed, Bayer may lose an amount equivalent to its acquisition cost of Monsanto within two years.

 

It is worth noting that Bayer AG’s total revenue in 2019 amounted to €43.5 billion (approximately $48.11 billion), representing a year-on-year increase of 3.5% on a constant-currency basis; net income surged by 141.4% to $4.52 billion. In other words, the costs associated with resolving the Monsanto herbicide litigation will exhaust all of Bayer’s net income generated since 2018. Furthermore, by the end of 2019, its total liabilities had reached $44.3 billion, implying that Bayer will lack sufficient funds to undertake any major mergers and acquisitions in the coming years.

 

 

For Bayer, 2019 was a year of immense pressure, and 2020 would be even more difficult. Its CEO, Werner Baumann, even lost the confidence vote of more than half of the shareholders at the annual general meeting in February this year—a first for a modern German company.

 

To escape its financial crisis, Bayer announced a series of divestment plans at the end of 2018, the largest of which was the sale of its animal health business for $7.6 billion.Health CareThe spin-off and merger with Elanco, a subsidiary of Eli Lilly, was put on hold due to U.S. antitrust scrutiny. Coupled with the impact of the global pandemic, the divestiture is expected to be delayed by at least six months to a year—a case of misfortunes never coming singly.

 

In Bayer’s pharmaceuticals business, revenue from the anticoagulant rivaroxaban (Xarelto) grew by 12.6% last year to €4.13 billion (at constant exchange rates); sales of the macular degeneration drug aflibercept (Eylea), developed in partnership with Regeneron and Santen Pharmaceutical, also rose 12.6% year on year, generating €2.49 billion in revenue for Bayer.

 

Anti-TumorIn the field, sales of Bayer’s first-line liver cancer drug sorafenib (Nexavar) decreased by 2.5% in 2019 to €706 million, while sales of its second-line liver cancer drug regorafenib (Stivarga) grew by approximately 30% in 2019, primarily driven by expansion in the Chinese market, where sales increased by 25% year-on-year. Apart from this, Bayer relatively lacks strong growth points with broad market prospects.

 

In 2019, Bayer remained one of the top ten pharmaceutical companies globally by revenue. However, barring any unforeseen circumstances, Bayer may no longer appear on next year’s top-ten list, as Bristol Myers Squibb (BMS), currently ranked 11th, is poised to break into the top ten through its mega-merger with Celgene, thereby displacing Bayer from the elite group. This long-established GermanEnterpriseThe challenges faced remain ongoing.