Shares of Bayer AG (DE:BAYN) sank nearly 5% yesterday after a Philadelphia court slammed the German multinational drug maker with a $2.25 billion fine. The fine relates to one of the several ongoing lawsuits against Bayer’s herbicide Roundup, which is accused of having cancer-causing effects.
Bayer is one of the world’s largest drug companies offering pharmaceuticals, consumer healthcare products, agricultural chemicals, seeds, and biotechnology products. Bayer shares are a part of the STOXX 50 index. BAYN shares have lost 45% in the past year.
Details About Bayer’s Roundup Lawsuits
A Pennsylvania man, who claimed and proved that his exposure to Roundup for over 20 years caused cancer, won a court ruling on January 26. The court ordered $2 billion in punitive charges, which could be reduced as Bayer plans to appeal the verdict, calling the damages “unconstitutionally excessive.” The remaining $250 million is in compensatory damages.
Bayer’s Roundup is a widely used weedkiller that became a part of the company’s portfolio through the $63 billion acquisition of Monsanto in 2018. People with years of exposure to the glyphosate-based Roundup have complained of developing cancer and filed over 165,000 lawsuits against Bayer. Out of these, over 110,000 were either settled or dismissed by the courts by the end of 2022. Despite the allegations, Bayer continues to sell Roundup with adequate warnings. It is slowly eliminating the use of glyphosate in products used by non-professional gardeners.
In 2020, Bayer paid $9.6 billion in fines to settle tens of thousands of cases related to Roundup, but further cases have been cropping since. Bayer plans to appeal Friday’s verdict, saying that the company has “strong arguments” to get it overturned. Bayer has won ten of the 16 Roundup cases at trial lately.
Bayer’s CEO Bill Anderson took over the helm in June 2023 and has since been tasked with reviewing the group’s structure while facing ongoing lawsuits. Bayer’s investors are also pushing the drug maker to split its businesses to make them more effective. Moreover, Bayer is heavily debt-laden, with minimal free cash flows.
Are Bayer Shares a Good Buy?
Following the verdict, UBS analyst Jo Walton maintained his Hold rating on BAYN stock with a price target of €34 (10.2% upside). Although Walton expects Bayer to seek a reduction in charges from the latest lawsuit, he remains on the sidelines owing to the uncertain outlook of future lawsuits.
On TipRanks, BAYN stock has a Hold consensus rating based on two Buys, ten Holds, and two Sell ratings. The Bayer AG share price forecast of €38.31 implies 24.1% upside potential from current levels.
