Bayer said in its petition that consumers should not be able to sue it under state law for failing to warn that Roundup increases cancer risk because the U.S. Environmental Protection Agency has found no such risk and requires no such warning. In fact, it argued, federal law does not allow it to add any warning to the product beyond the EPA-approved label.

Why it matters: Bayer is a major supplier of crop protection products, including Roundup, for Canadian farmers

The company tried to make that case to the Supreme Court and was rebuffed in 2022, but a federal appeals court has since agreed with the company in a split from other appeals courts. The Supreme Court is generally more likely to take cases where federal appeals courts are divided.

A Supreme Court victory for Bayer would likely make it much more difficult for the lawsuits to continue, though it is not clear whether it would eliminate them entirely.

Friday’s petition came in the case of John Durnell, who in 2023 won a $1.25-million verdict in a St. Louis, Missouri state court. Bayer has been hit with much larger verdicts over Roundup, most recently a $2.1-billion award last month to a plaintiff in Georgia.

The company has paid about $10 billion to settle claims that Roundup, based on the herbicide glyphosate, causes cancer. About 67,000 further cases are pending, for which the group has set aside $5.9 billion in legal provisions.

CEO Bill Anderson has struggled to revive a share price that has plunged by more than 70 per cent since Bayer’s $63-billion acquisition of Monsanto in 2018 that saddled it with costly litigation and debt.

The company’s problems include the glyphosate litigation, a 2023 development setback for its most promising experimental medicine, weak agriculture markets and pressure from some investors to separate or sell businesses. Bayer plans to seek shareholder approval to raise equity capital worth close to 35 per cent of its outstanding shares over the next three years to cover possible costs of U.S. litigation.

The company has warned U.S. lawmakers it could stop selling Roundup, which is widely used by U.S. farmers, unless they can strengthen legal protection against the litigation. It has already replaced glyphosate with other ingredients in the home consumer version of Roundup.

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Bayer has paid about $10 billion to settle disputed claims that Roundup, based on the herbicide glyphosate, causes cancer. About 67,000 further cases are pending for which the group has set aside $5.9 billion in legal provisions.

Why it matters: Roundup and other glyphosate products are key weapons in Canadian farmers’ weed-killing arsenal.

The German company has said plaintiffs should not be able to take Bayer to court by invoking U.S. state rules given the federal U.S. Environmental Protection Agency has repeatedly labelled the product as safe to use, as have regulators in other parts of the world.

“Without regulatory clarity (Bayer) will need to exit the business. Bayer have been clear with legislators and farmer groups on this,” analysts at brokerage Jefferies said in a note on Thursday, citing guidance Bayer’s leadership provided in a meeting.

Bayer, which acquired Roundup under the $63 billion takeover of Monsanto in 2018, said: “We are exploring every possibility to end this litigation.” It declined to comment further.

Disclosing glyphosate sales numbers for the first time, Bayer on Wednesday said the product, one of the most widely used weedkillers in U.S. field farming, generated 2.6 billion euros ($2.8 billion) in revenue last year.

“Bayer could reach a point in the future where the company is forced to discontinue the sale of the product in the United States,” a person familiar with the matter told Reuters, requesting anonymity because of the sensitivity of the matter.

As it released fourth-quarter earnings on Wednesday, the company said it was working to “significantly contain” litigation by 2026.

It has repeatedly said it is working with farmers’ associations to lobby U.S. federal and state legislators. It is also preparing to again petition the Supreme Court for legal protection, following a failed attempt in 2022.

Bayer, however, has not previously threatened to withdraw the product from the U.S. market, although it replaced glyphosate in U.S. consumer products with different weedkilling substances.

One of the world’s largest seeds and pesticides makers, Bayer competes with Corteva, BASF and China’s Syngenta.

It is the only glyphosate producer in the United States, where the U.S. farming sector, which also imports cheaper generic glyphosate from China, relies on modified soy and corn that are resistant to its weedkilling effect.

The glyphosate litigation, which Bayer inherited from a Monsanto deal that was masterminded by Anderson’s predecessor, has weighed heavily on the stock, together with factors, including a drug development setback in 2023 and a weak agriculture markets.

Bayer said at the time of its results release on Wednesday it would internally separate the glyphosate business from the rest of the Crop Protection division.

When asked in an analyst call whether the glyphosate business could be sold, divisional head Rodrigo Santos said: “We’re going to continue to discuss in the future, evaluating all the alternatives that we have for the business. That’s always what we do”.

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Why it matters: Bayer is a key provider of agricultural inputs for Canadian farmers

The German maker of drugs and farming pesticides said 2025 would be the most difficult in terms of financial performance, with net sales roughly in line with the prior year and a drop in earnings and free cash flow.

“The company expects improved performance from 2026 onwards,” it added.

CEO Bill Anderson has faced investor pressure to deliver on restructuring efforts and reverse what is projected to be the third consecutive annual drop in operating income in 2025.

Beyond 2026, Bayer said it was targeting an adjusted operating margin percentage in the “mid-twenties” at its Crop Science division by 2029, up from 19.4 per cent last year.

“The 2025 guidance is not particularly encouraging, but the company’s longer-term outlook and plans to address key issues offer some hope for future improvement,” Deutsche Bank analysts said in a note.

Bayer’s shares gained as much as 7.7 per cent and were up 3.9 per cent by 11:10 GMT.

The CEO is cutting managerial jobs, speeding up decision-making and slashing red tape. Anderson reaffirmed on

Wednesday he would hold off on any plans to break up Bayer’s diversified businesses for another one or two years.

The group, which is grappling with costly U.S. product liability litigation over its weedkiller Roundup, said on Wednesday it had slashed 7,000 jobs last year and cutbacks would continue.

For the fourth quarter of last year, Bayer reported a 22 per cent fall in earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for one-off items, to 2.35 billion euros (C$3.86 billion), beating a company-provided consensus of 2.27 billion euros.

It forecast adjusted EBITDA of between 9.3 billion and 9.8 billion euros (C$14.4 billion to $15.1 billion) this year, based on end-2024 foreign exchange rates. That was down from 10.1 billion in 2024 and compares with a market consensus of 9.4 billion.

— Additional reporting by Patricia Weiss

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Chief Executive Bill Anderson has started cutting jobs, speeding up decision-making and slashing red tape in a bid to turn around the embattled industrial group, while putting plans to break up its diversified businesses on hold.

Shares in Bayer were down 11.6 per cent to 21.57 euros (C$31.89) at 10:04 GMT, their lowest level in 20 years following its update.

“We’re in the midst of a big agriculture downturn. And that’s very frustrating for people … We understand the investor sentiment, but we remain very optimistic that we’ve got a strong future,” Anderson said in the statement.

He also pointed to strong launches for Bayer’s new drugs Nubeqa for prostate cancer and Kerendia for kidney disease.

However, Markus Manns, a portfolio manager at Bayer shareholder Union Investment in Germany, criticised the CEO for not having publishing medium-term financial targets, which need to be addressed to win back trust.

“Bayer’s transformation needs to be urgently accelerated and management needs to finally communicate a sustainable growth strategy with specific mid-term targets for sales, earnings and debt reduction,” said Manns.

Chief Financial Officer Wolfgang Nickl said in Bayer’s quarterly earnings statement it expected “a muted outlook on top and bottom line next year with likely declining earnings”.

Based on earnings before interest, tax, depreciation and amortisation (EBITDA), and adjusted for special items, the 2025 forecast would mean a third consecutive annual decline, after the group on Tuesday also lowered its projection for 2024.

Bayer said that the earnings measure, when adjusted for currency impacts, would likely be between 10.4 billion euros (C$ 15.4 billion) and 10.7 billion euros (C$15.8 billion), down from a previous 10.7-11.3 billion euro forecast and last year’s 11.7 billion (C$17.3 billion).

Its July-to-September EBITDA, adjusted for one-offs, fell almost 26 per cent to 1.25 billion euros (C$1.85 billion), missing the average analyst estimate of 1.31 billion euros posted on Bayer’s website, with Bayer citing weak Latin American agricultural markets.

Regulation

Bayer’s $63 billion (C$87.9 billion) purchase in 2018 of seeds and pesticides maker Monsanto under Anderson’s predecessor was a long-term bet on robust growth in farming supplies which has so far misfired.

Debt and costly U.S. product liability litigation over disputed claims that Monsanto weedkiller Roundup causes cancer are further burdens which Anderson is struggling to shake off.

Bayer shares have lost close to 80 per cent since the Monsanto deal was closed in 2018 and about 70 per cent since it was agreed in 2016.

U.S. agrichemicals competitor Corteva and the agriculture unit of Germany’s BASF have also been hit by lower prices as weak produce prices weighed on demand.

Bayer’s shares trade at 4.6 times forward earnings over the next 12 months, well below BASF at 12 and 18.8 for Corteva. The ratio is widely used to gauge the relative value of stocks.

Bayer said its business is set to suffer more because U.S. approval for new soy seeds to be used with weedkiller dicamba will not be in time for the 2025 sowing season and EU regulators will pull insecticide Movento from the market under the bloc’s environmental agenda known as the Green Deal.

In addition, cost-conscious U.S. farmers are turning to cheap generic copies of Bayer’s pesticides, it said.

Bayer said that special charges of 4.1 billion euros (C$6.06 billion), mainly from write-downs on intangible assets in its Crop Science division, resulted in a quarterly net loss of 4.18 billion euros (C$6.18 billion), compared with a 4.57 billion (C$6.76 billion) euro loss a year earlier.

It confirmed its previous currency-adjusted guidance for 2024 sales and earnings per share before certain items.

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Two other larger German mutual fund management houses, DWS and Union Investment, have said they would vote in favour of approving the management board’s actions while shareholder advisory firms Glass Lewis and Institutional Shareholder Services (ISS) have recommended such a vote.

Bayer CEO Bill Anderson will face questions at the AGM over his decision in March to suspend for up to three years any preparations to break apart the German maker of pharmaceuticals, crop protection products and consumer health remedies.

Anderson, who became CEO in June 2023, has had a tumultuous start with a continued wave of U.S. litigation about an alleged cancer-causing effect of weedkiller glyphosate and a major setback in drug development late last year.

“We don’t regard Mr. Anderson’s start as successful. We would have wished for more of a focus on aspects that are relevant for the share price,” Deka’s head of sustainability and corporate governance Ingo Speich said in a speech made available to Reuters ahead of the AGM.

The vote on ratifying the executive board’s business conduct, which prominently wraps up every German AGM, is largely symbolic because it has no bearing on management’s liability or tenure. But it is treated as a key gauge of investor sentiment.

Anderson said in a statement that he would seek to boost drug development, while also tackling litigation, debt and excessive corporate bureaucracy.

“The soul of this company is alive and well,” he said, adding that he would work hard to address shareholders’ frustration over the falling share price.

Harris Associates, another major Bayer shareholder, has told Reuters it strongly supports Anderson, including his decision to suspend work on breaking up the group.

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In an unscheduled statement late on Monday, the German drugs and pesticides maker said it was projecting 2023 earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for one-offs, to be in a range of 11.3 billion euros ($12.5 billion) and 11.8 billion euros on a currency-adjusted basis, down from 13.5 billion euros reported for 2022.

That was lower than a previous 2023 outlook of 12.5 billion euros, or slightly higher.

Free cash flow would come in at zero, down from a previous prediction of 3 billion euros, said the company, which is due to release detailed second-quarter results on Aug. 8.

“Based on the anticipated market development, in particular with respect to the glyphosate business, Bayer also expects to record a goodwill impairment of approximately 2.5 billion euros,” it said.

That would result in a second-quarter net loss of 2 billion euros.

Analysts at Deutsche Bank said dry weather conditions in particular had hurt farmers’ demand for seeds and pesticides.

The tougher environment adds to challenges faced by new CEO Bill Anderson, the former Roche ROG.S executive who took over the top job in June.

“This is an anything but a good start for the new CEO,” Markus Manns, portfolio manager at German mutual fund firm Union Investment, said on Tuesday.

“Bayer could have used the money for debt reduction or for pharmaceutical licensing deals,” he added.

Analysts at Barclays said the dwindling cash flow was a particular surprise, and that Anderson was likely keen to get the bad news out quickly to allow for a fresh start.

“This feels like a kitchen sink to us,” they said.

Bayer shares dropped as much as 3.2% in early trading but were up 1.6% by 0854 GMT.

Weak agriculture markets have also hit rivals, so that Bayer’s profit warning was largely foreseen by analysts. Crop protection company FMC FMC.N this month cut its full-year guidance after wholesale distributors slashed orders to reduce inventory levels. Industrial chemicals group BASFBASFn.DE, which competes with Bayer in seeds and pesticides, this month cut its earnings guidance, though it did not provide details on its agriculture business.

Bayer had already warned in May that its 2023 results would likely come in at the lower end of its targeted range, hurt by cost inflation and a slump in prices of glyphosate-based weedkillers from last year’s highs.

Bayer saw herbicide sales jump 44% in 2022 after Hurricane Ida damaged rival producers and constrained Chinese suppliers failed to plug the gap. Prices have been dropping sharply as competitors have returned to the market this year.

Bayer, which has paid billions for litigation over its glyphosate weedkillers, replaced its previous CEO Werner Baumann early amid demands from some investors that the German industrial giant simplify its diversified structure and split into separate groups.

($1 USD = 0.9032 euro)

–Reporting for Reuters by Thomas Escritt and Ludwig Burger.

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Despite recent improvements in the company’s agriculture business and drug development prospects, Bayer shares have been weighed down by litigation related to a product it acquired through its 2018 takeover of Monsanto. Shareholders have also cited a lack of market trust in its top management.

“When it comes to CEO succession we say: the sooner the better,” Markus Manns, a portfolio manager at Union Investment, one of Bayer’s 10 biggest shareholders, told Reuters.

The demand comes within days of another major German portfolio manager saying that supervisory board chairperson Norbert Winkeljohann must speed up the search for the successor to Baumann, who has led the company for nearly seven years.

Ingo Speich, head of sustainability and corporate governance at Deka, was quoted in Saturday’s Frankfurter Allgemeine Sonntagszeitung newspaper as saying Baumann had lost market credibility and so could no longer initiate strategic changes.

The mutual funds firm is among Bayer’s 20 largest shareholders.

“The Bayer stock is in a crisis of trust which the executive board is responsible for,” Speich told Reuters on Tuesday.

“Bayer has to take investor demands more seriously going forward. The Bayer stock is currently reacting more strongly to news from investors than to operating results. That’s a clear sign that something is wrong,” Speich added.

Union Investment’s Manns cautioned that the non-executive supervisory board may need time to find a qualified candidate.

“I’m sure the board is aware of the urgency of this personnel issue,” said Manns.

Baumann, who engineered the troubled Monsanto deal, was given a new contract in 2020 that runs until 2024 and said at the time he would leave the company when that term expires.

A spokesperson said Bayer was always open to a constructive dialogue with shareholders and declined to comment further.

Bayer is also facing demands from activist investor Bluebell Capital Partners to break up the company, including selling off its consumer health unit and later separating its pharmaceuticals and agricultural businesses.

Another activist investment fund, hedge fund veteran Jeffrey Ubben’s Inclusive Capital Partners, said this month it had also acquired a stake in Bayer, whose products include painkiller Aspirin, Yasmin contraceptives and stroke prevention pill Xarelto.

A stalwart of German industry with a nearly 160-year history, Bayer has lost over 40 per cent of its market value since the Monsanto deal, which was followed by a string of lawsuits over allegations that Monsanto’s Roundup herbicide causes cancer.

— Reporting for Reuters by Ludwig Burger and Patricia Weiss in Frankfurt.

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Bayer is now targeting earnings before interest, taxes, depreciation and amortisation (EBITDA), adjusted for special items, of about 13 billion euros ($13.21 billion), based on June 30 foreign exchange rates, where it had previously predicted about 12 billion euros, it said in a statement.

Bayer, which has been hit by litigation costs over claims that a weedkiller it acquired under its Monsanto takeover causes cancer, said that second-quarter adjusted EBITDA jumped 30 percent to 3.35 billion euros, above an average analyst estimate of 3.28 billion euros posted on the company’s website.

Prices of agricultural commodities, such as corn and soy have surged globally after Russia’s invasion of Ukraine disrupted farming and grain transport there, prompting farmers elsewhere to use more chemicals and seeds to boost output.

The crop science division, which generated the bulk of Bayer’s earnings during the first half of the year, saw adjusted EBITDA surge by more than 70 percent to 1.75 billion euros in the second quarter, beating a market consensus of 1.56 billion euros.

By contrast, a litigation settlement and write-downs resulted in a net loss of almost 300 million euros for the quarter, where analysts had projected a net profit of about 1.5 billion, hit by special charges of 2.1 billion euros.

That included 694 million euros set aside for an expected settlement with the State of Oregon over waste water contaminated with PCB, a chemical Monsanto produced up until 1977.

Other charges included restructuring measures and write-downs on certain assets due to a strong rise in interest rates.

($1 = 0.9842 euros)

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Bayer in August filed a petition with the Supreme Court to reverse a lower court decision that upheld $25 million in damages awarded to California resident Edwin Hardeman, a Roundup user who blamed his cancer on the German pharmaceutical and chemical giant’s glyphosate-based products (all figures US$).

The Supreme Court’s decision on whether to take up the matter is being closely watched as Bayer maneuvers to limit its legal liability in thousands of cases. U.S. Solicitor General Elizabeth Prelogar in the coming months is due to file a brief expressing the administration’s views.

Bayer said in a statement that it is encouraged by the court’s announcement, which often indicates the justices are interested in hearing a case.

The U.S. government “has consistently found that glyphosate-based herbicides can be used safely and are not carcinogenic, and has stated that a cancer warning would be false and misleading and misbrand the product,” Bayer’s statement said.

Bayer has lost three appeals against verdicts that sided with users of Roundup, awarding them tens of millions of dollars each. Bayer has pinned hopes for relief on the conservative-majority Supreme Court, which has a reputation for being pro-business.

Bayer asked the Supreme Court to review the verdict in Hardeman’s case, which was upheld by the San Francisco-based Ninth U.S. Circuit Court of Appeals in May. Hardeman had regularly used Roundup for 26 years at his home in northern California before being diagnosed with a form of non-Hodgkin’s lymphoma.

There are more than 25,000 related claims that Bayer has not settled yet.

Bayer, which also makes aspirin, Yasmin birth-control pills and the stroke prevention drug Xarelto among other products, has argued that the cancer claims over Roundup and its active ingredient glyphosate go against sound science and product clearance from the U.S. Environmental Protection Agency. The EPA has upheld guidance that glyphosate is not carcinogenic and not a risk to public health when used as indicated on the label.

Bayer has said it should not be penalized for marketing a product deemed safe by the EPA and on which the agency would not allow a cancer warning to be printed.

The lawsuits against Bayer have said the company should have warned customers of the alleged cancer risk. Bayer wants the Supreme Court to find that the EPA label approval under a federal law called the Federal Insecticide, Fungicide and Rodenticide Act preempts the “failure to warn” claims brought under state law.

Roundup-related lawsuits have dogged Bayer since it acquired the brand as part of its $63 billion purchase of agricultural seeds and pesticides maker Monsanto in 2018.

Bayer struck a settlement deal in principle with plaintiffs in June 2020 but failed to win court approval for a separate agreement on how to handle future cases. That settlement deal applied only to U.S. cases and not to those in Canada, where Bayer said at the time it’s “not contemplating a settlement.”

In July, Bayer took an additional litigation provision of $4.5 billion in case of an unfavourable ruling by the Supreme Court or in case the justices declined to consider its petition. This leaves “significant upside” if the Supreme Court rules in its favour, according to Bayer.

The provision came on top of $11.6 billion it previously set aside for settlements and litigation over the matter.

Bayer plans to replace glyphosate in weedkillers for the U.S. residential market for non-professional gardeners with other active ingredients.

It will continue to sell the herbicide to farmers, who rely on it heavily and whose role in the litigation has been described as negligible by Bayer.

As of late October, Bayer had reached settlements in about 98,000 cases out of about 125,000 cases overall.

A California jury last week found that Roundup did not cause a woman’s non-Hodgkin’s lymphoma.

— Reporting for Reuters by Lawrence Hurley and Ludwig Burger; additional reporting by Tom Hals.

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The company said the write-downs, driven by weaker demand from farmers due to low biofuel prices, plus an increase of about US$750 million in the costs of settlement terms with U.S. plaintiffs over Roundup, resulted in a loss before interest and tax of 9.4 billion euros in the third quarter.

Bayer was caught up in litigation over Roundup, based on the herbicide glyphosate, as a result of its 2018 takeover of Monsanto for about US$63 billion, which made it the world’s largest supplier of seeds and pesticides.

“The impact of the (coronavirus) pandemic is placing additional strain on our Crop Science division. We are also facing negative currency effects,” chief financial officer Wolfgang Nickl said.

Nickl said a massive depreciation of the Brazilian real was weighing heavily on business in the world’s second-largest agricultural market.

Bayer said it was unable to say what part of the impairment was attributable to legacy Monsanto businesses, saying only that two-thirds of the writedowns were due to currency and interest rate effects.

Bayer on Sept. 30 had predicted impairment charges in the mid- to high-single-digit billion-euros range on agricultural assets and warned of a slight decline in 2021 core earnings per share.

Bayer struck an US$11 billion outline agreement with U.S. plaintiffs’ lawyers in June but a judge later took issue with a side arrangement on future cases that may yet be lodged, known as a class plan.

Addressing those concerns will prove about US$750 million more costly, Bayer said on Tuesday.

Bayer said it was “far enough along in the negotiations to know that the new plan will come in at approximately two billion U.S. dollars, an increase over the original cost of 1.25 billion U.S. dollars.”

Bayer’s shares were down 0.6 per cent at 0850 GMT, marking a loss of 22 per cent since Bayer first flagged writedowns and a likely decline in 2021 earnings on Sept. 30.

“This situation confirms our belief that Crop Science is a business with low visibility,” said Jean-Jacques Le Fur, an analyst at brokerage Bryan Garnier. He reiterated a “sell” recommendation, also citing uncertain Roundup litigation costs.

The charges more than offset combined gains booked in the quarter from the sale of its animal health business to Elanco and the divestment of a stake in industrial park operator Currenta of five billion euros.

That resulted in a net loss of 2.7 billion euros compared with an average analyst projection of one billion euros in net income.

Bayer said that 88,500 of the 125,000 glyphosate claims in the class settlement have been agreed in principle and that it was hoping to make considerable progress over the next few months.

— Reporting for Reuters by Ludwig Burger and Patricia Weiss.

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