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Bayer shares plunge after Monsanto loses in Roundup trial
SHARES in German chemicals and pharmaceuticals giant Bayer tumbled more than 10 per cent as markets opened on Monday, as investors reacted to a shock US ruling against freshly-acquired Monsanto.
Stock in the Leverkusen-based group fell 10.4 per cent to 83.61 euros around 9:25am (0725 GMT), after a California jury on Friday awarded a dying groundskeeper damages of almost US$290 million, saying Monsanto should have warned buyers that its flagship Roundup weedkiller could cause cancer.
While observers have predicted thousands of other claims could follow, Bayer said the jury's findings went against scientific evidence and that other courts might "arrive at different conclusions".
Lee Johnson, a former school groundskeeper whose doctors didn't think he'd live long enough to learn the verdict, prevailed on Friday in San Francisco state court. Jurors awarded Mr Johnson US$39 million for his losses and US$250 million to punish the company after finding it liable for a design defect and failing to warn of Roundup's risks. Monsanto said it will appeal.
The trial was an important test of the evidence against Monsanto and will serve as a template for litigating thousands of other claims over the herbicide. Bayer closed a deal to buy Monsanto for US$66 billion in June. If the litigation generates large verdicts against Monsanto, it could have a material impact on Bayer's bottom line, said Chris Perrella, an analyst for Bloomberg Intelligence.
Shares of Bayer slumped 8.7 per cent, the most since June 2016, to 85.27 euros in Frankfurt on Monday. That extended its rout this year to almost 17 per cent.
The "decision does not change the fact that more than 800 scientific studies and reviews - and conclusions by the US Environmental Protection Agency, the US National Institutes of Health and regulatory authorities around the world - support the fact that glyphosate does not cause cancer, and did not cause Mr Johnson's cancer," Monsanto vice president Scott Partridge said in a statement on Friday.
Since Roundup is ubiquitous in modern farming, there's a "huge potential liability", though it's very uncertain it will materialise, Bloomberg's Mr Perrella said.
Bayer investors might not be aware of the risks because many analysts covering the company focus on pharmaceuticals, he said.
Glyphosate, the main ingredient in Roundup, was first approved for use in Monsanto's weed killer in 1974. While becoming the world's most popular and widely used herbicide, the question of whether it causes cancer has been hotly debated by environmentalists, regulators, researchers and lawyers - even as Monsanto has insisted for decades that it's perfectly safe.
Working for a school district in Benicia, California, about 40 miles east of San Francisco, Mr Johnson mixed and sprayed hundreds of gallons of Roundup. He was diagnosed with cancer in 2014, and in July 2017, after chemotherapy and other treatments, his oncologist gave him six months to live.
Mr Johnson's lawyers, relying on his testimony and expert witnesses, argued that his exposure, including accidents that got him soaked from head to toe in Roundup, caused his non-Hodgkin's lymphoma. He was seeking US$412 million in damages.
Monsanto scientists knew of the cancer risk posed by Roundup as far back as the 1970s, but failed to inform the public and instead engaged in a "deliberate effort to distort the truth" as the weed killer generated hefty returns, Mr Johnson's lawyer, Brent Wisner, told the jury in closing arguments on Tuesday.
"Despite the Environmental Protection Agency's failure to require labelling, we are proud that an independent jury followed the evidence and used its voice to send a message to Monsanto that its years of deception regarding Roundup is over and that they should put consumer safety first over profits," Mr Wisner said in a statement after the verdict.
Monsanto argued that the type of cancer contracted by Mr Johnson takes many years to form. The short period between Mr Johnson's first exposure in 2012 and his diagnosis in 2014 made any connection between his contact and the disease impossible, according to the company. BLOOMBERG