BAYN Bayer AG

By Laura Kusisto, Ruth Bender and Jacob Bunge 

Bayer AG faces an extraordinary challenge as it tries to settle tens of thousands of claims that its Roundup weedkiller causes cancer: The product remains on the shelves, making it almost impossible to put the litigation to rest forever.

Experts say Bayer is in an unusual position compared with other companies that have faced multibillion-dollar lawsuits over their products. To end mass-tort litigation, other companies generally have discontinued or altered their products or added warning labels -- all of which are problematic for the German pharmaceutical and agricultural firm.

"If you're still putting out a product that people claim injures them, I don't know how they can insulate themselves from future liability," said Carl Tobias, a University of Richmond law professor who studies product-liability cases. "I think they're in a bind."

Bayer is moving closer to a settlement potentially totalling $10 billion, people familiar with the matter said, making it one of the most complex and costly corporate litigation cases ever. Many investors are demanding clarity and expect Bayer to deliver at least a partial solution before the company's next annual shareholder meeting in late April.

But Bayer's case is tricky because regulators including the U.S. Environmental Protection Agency have said that glyphosate, the main chemical ingredient in Roundup, doesn't cause cancer. The agency said last year that manufacturers like Bayer can't put cancer warnings on glyphosate-based herbicides like Roundup, and that states can't require such labels. The company also can't alter the product to remove glyphosate -- which plaintiffs claim poses a cancer risk -- because it is the herbicide's main weedkilling chemical.

Bayer has said repeatedly that glyphosate will remain an important product and has applied for re-approval of the chemical in the European Union, where some countries including Germany are banning sales.

Bayer Chief Executive Werner Baumann has said any settlement framework must come "relatively close" to guaranteeing Bayer won't face a future wave of lawsuits. People familiar with Bayer management's thinking said the company would take its time to reach such a settlement, even if it angers investors seeking clarity before the annual meeting.

The settlement talks come after Bayer lost its first three trials with juries awarding some $2.4 billion to plaintiffs -- later reduced by judges to about $190.5 million. Bayer has appealed, but those processes could take years to play out.

"The trials have gone so spectacularly bad for Bayer that they don't want to go in front of another jury," said Adam Zimmerman, a law professor at Loyola Law School, Los Angeles.

Experts said they couldn't identify another company that has settled yet persisted in selling a product unaltered and without a warning label. Johnson & Johnson has continued selling its talcum powders while defending itself against some 17,000 lawsuits alleging they cause ovarian cancer or mesothelioma, and that J&J failed to properly warn consumers of this purported risk. The company will face similar questions if it decides to settle the cases.

Roundup remains on many hardware store shelves, creating a vast pool of home gardeners who could claim it caused their cancer. Pulling Roundup from the consumer market would cost Bayer about $200 million in annual sales, Bernstein analysts have estimated.

Roundup accounts for around 5% of Bayer's total sales, the company has estimated -- sold mostly to farmers, who have stuck by Roundup despite the cancer litigation.

The Roundup dilemma led investors last year to reject a confidence vote in Mr. Baumann, whom some blamed for the legal problems that followed Bayer's $63 billion acquisition of biotech seed giant Monsanto Co. in June 2018. Monsanto is the maker of Roundup.

Bayer lost about a third of its market value as the first jury verdicts rolled in. The shares have bounced back since the company and plaintiffs' attorneys began settlement talks last summer and have agreed along the way to postpone trials. If talks were to collapse and trials resume, Bayer's share price could get stuck in another rout, analysts say.

Of the $10 billion under consideration in settlement talks, $8 billion would be used to pay current plaintiffs and $2 billion would be set aside as a fund for future claims, according to people familiar with the matter. That would exceed recent big-ticket payouts such as Merck & Co. Inc.'s nearly $5 billion settlement over its painkiller Vioxx and Takeda Pharmaceutical Co. Ltd.'s roughly $2.4 billion settlement over allegations its diabetes drug caused bladder cancer.

Many analysts say a settlement in that range would still be a positive outcome for Bayer. But even then, it is difficult to guarantee such a figure wouldn't eventually surpass $10 billion, academics and lawyers say. They said the settlement under discussion couldn't bar future plaintiffs from attempting to sue if they deem the payouts from the $2 billion fund insufficient or if it runs out, potentially exposing Bayer to future liability.

Even if it decided to stop selling Roundup, partially or entirely, plaintiffs could theoretically still sue a few years from now, experts say. Non-Hodgkin lymphoma, the type of cancer plaintiffs say glyphosate causes, can take years to develop.

Experts said certain measures could help discourage future litigants. As part of the settlement, plaintiff attorneys could agree not to advertise and recruit future litigants. The federal judge overseeing the settlement could order that any future litigants each produce their own expert report linking their cancer to Roundup when filing a case. That would be a hurdle for attorneys who file large numbers of cases at once, costing several thousand dollars per expert report.

Bayer could also eventually win its appeals, giving it an upper hand that would discourage future plaintiffs from suing -- or even wipe out remaining lawsuits, if a higher court rules that the company can't warn about a cancer risk that regulators have determined doesn't exist.

"There is a way to get more peace," Mr. Zimmerman said. "I just don't know if it will be global peace."

Write to Laura Kusisto at laura.kusisto@wsj.com, Ruth Bender at Ruth.Bender@wsj.com and Jacob Bunge at jacob.bunge@wsj.com

(END) Dow Jones Newswires

February 12, 2020 14:45 ET (19:45 GMT)

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