Bayer’s shares drop 20% to lowest level since 2009 due to drug development and Roundup trial setback

UNITED STATES: Bayer AG (ETR:BAYGN), a prominent German company in the pharmaceutical and agriculture sectors, experienced its largest-ever drop in market value, a staggering loss of approximately €7.6 billion (US$8.3 billion).

This downturn follows substantial legal issues and setbacks in drug development, intensifying the pressure on the company’s new leadership to articulate a comprehensive turnaround strategy.

The company’s shares, traded on the Frankfurt Stock Exchange, plummeted by 20%, reaching their lowest point since 2009.

This decline marks a 30% decrease in share value over the course of this year.

One of the setbacks occurred when Bayer announced on Sunday (19 Nov) that the late-stage testing of a drug named asundexian, intended for heart disease treatment, would be halted due to its apparent lack of effectiveness.

Initially projected in January to potentially yield sales surpassing US$5 billion, asundexian was anticipated to be a cornerstone in Bayer’s pharmaceutical portfolio for driving growth.

Bayer’s Monsanto faces second wave of lawsuit

Simultaneously, a significant legal blow struck Bayer when a Missouri Circuit Court, in a landmark ruling late on a Friday, mandated that Bayer AG’s subsidiary, Monsanto, must pay a combined sum exceeding US$1.5 billion to three former users of the company’s weed killing product, Roundup.

These individuals attributed their cancers to the controversial product in what became one of the company’s most substantial trial losses related to the herbicide.

This verdict adds to a series of recent legal challenges against Monsanto, citing carcinogenic properties in Roundup.

Notably, the sum of over US$1.5 billion stands as one of the largest damage awards imposed on a US corporate defendant this year.

Bayer has indicated its intention to contest the verdicts and maintains its stance that the product, Roundup, is safe.

According to Fortune, these recent developments intensify the challenges for Bill Anderson, who assumed the role of chief executive in June.

Anderson revealed this month that he’s considering a potential split of the conglomerate into separate entities focused on pharmaceuticals and agriculture.

Anderson steps into leadership at Bayer during a period fraught with difficulties, particularly stemming from the US$63 billion acquisition of Monsanto, which has soured.

Additionally, the pharmaceutical unit grapples with patent expirations affecting critical treatments.

Currently, Bayer is embroiled in another Roundup trial, this time before a state court jury in Philadelphia, involving a plaintiff attributing his cancer to the weed killer.

The trial is ongoing, and closing arguments are anticipated later this month or in early December, as per lawyers involved in the case.

Furthermore, another case is scheduled to commence in California in December, while at least three additional cases are slated to begin in Philadelphia in the upcoming months.

Singapore sovereign fund Temasek invested in Bayer in 2018

In April 2018, Singapore’s sovereign fund Temasek Holdings decided to invest in Bayer. It bought 3.6 per cent stake for 3 billion euros at 96.77 euros per share at the time.

The money is used as part of Bayer’s plan to takeover Monsanto. Together with its existing holding in Bayer, Temasek would then own about 4 per cent in Bayer after the transaction.

By June 2018, with Temasek’s help, Bayer successfully acquired Monsanto to become the biggest seed and agricultural chemical maker in the world.

However, since the acquisition, lawsuits have been mounting in the US whether Monsanto’s  “Roundup” causes cancer.

Two months after Temasek helped Bayer to acquire Monsanto, in a landmark verdict in August 2018, Monsanto was ordered by a San Francisco court to pay US$289 million in punitive damages and compensatory damages. Bayer’s subsidiary, Monsanto, appealed several times, but lost.

So far, since the acquisition of Monsanto 5 years ago, Bayer agreed to settle much of that litigation for US$10.9 billion in 2020. As of February this year, about 100,000 claims had been settled or deemed ineligible. Nevertheless, some 40,000 cases are still pending.

In June, Bayer’s share price was around 52.33 euros, but now it plummetted to merely 33.99 euros as of Wednesday (22 Nov).

A quick check online shows Temasek is still largely holding on to Bayer’s share. It is the largest shareholder of Bayer with 3.5% of holdings.

Since Temasek bought 3 billion euros worth of shares at 96.77 euros in 2018, five years ago, that means it has lost 62.78 euros per share or approximately 64% of the original 3 billion euros investment.

This amounts to about 1.9 billion euros or approximately S$2.7 billion of losses.