EUR 850.00 For Business Accounts Only

Morningstar | Judge Lowers Penalty Against Bayer in Glyphosate Case, but Reduction Is Less Than Initially Signaled

We don't expect any major changes to our Bayer fair value estimate after a California judge reduced the initial glyphosate verdict of $289 million (in the Johnson case) against Bayer down to close to $80 million, but the reduction was not as much as the judge had partially signaled earlier in the month. However, we do plan to raise our uncertainty rating on the stock to high from medium based on a wider spread of potential outcomes from the ongoing glyphosate litigation (including the Johnson case and 8,000 related cases). Earlier in October, the California judge appeared very skeptical of the jury's ruling in the Johnson case, which suggested a more significant reduction in the verdict than was ultimately decided. We expect Bayer will appeal the case, and that the final legal costs will be much lower, based on the scientific data from the Environmental Protection Agency, or EPA; National Institutes of Health, or NIH; European Chemicals Agency; and European Food Safety Authority all saying there is no link from glyphosate to cancer. Nevertheless, we still model in EUR 2 billion in legal costs for Bayer; we expect this legal process to continue for several years, as Bayer will likely litigate each of the remaining related 8,000 cases one by one. While the number of remaining cases is high, we believe most of them have low validity and are likely looking for any minor payment that might come with a potential class-action settlement. In terms of next steps for the California case, the plaintiff has until Dec. 7 to decide whether to accept the reduced ruling; we expect the plaintiff will accept it. We then expect Bayer to appeal the case.