Bayer Shares Jump After Monsanto Weedkillers Court Ruling

01/04/19 10:04 AM EST
By Ruth Bender and Donato Paolo Mancini 

BERLIN-- Bayer AG shares rose by more than 4% Friday after the German chemicals company scored a court victory in the run-up to crucial trials over whether recently acquired Monsanto Co. weedkillers can cause cancer.

U.S. District Judge Vince Chhabria granted a request late Thursday from Bayer to stagger the submission of evidence in the so-called bellwether trials, potentially limiting the evidence presented by the plaintiff's lawyers to the jury. Bellwether cases are selected to test arguments and gauge possible recoveries for other similarly situated plaintiffs in an attempt to reach a large-scale resolution.

The judge granted the request for "bifurcation"--essentially a split of the trial into two phases. Lawyers for the plaintiff must demonstrate that the chemical glyphosate in the weedkillers caused his cancer, before they can present evidence that manufacturer Monsanto, now owned by Bayer, acted with malice.

The move represents a small success in Bayer's efforts to orient the proceedings toward discussing whether glyphosate can cause cancer, which it denies. The company has argued that a previous court decision against it had been overly based on emotion.

"We welcome the court's decision to focus the trial on the extensive scientific findings that are relevant for human health and confirm the safety of glyphosate," Bayer said in a statement. "It's an encouraging signal and a step toward a rationalization of the discussion."

Bayer has vigorously defended its weedkillers ever since a San Francisco jury in August found that Monsanto weed killers were responsible for causing a man's cancer and that Monsanto knew or should have known of potential risks and failed to warn consumers.

Bayer has repeatedly pointed to scientific evidence and regulatory decisions that established glyphosate was safe to use.

That court decision, weeks after Bayer completed its $63 billion Monsanto acquisition, sent Bayer's shares plummeting as investors grew concerned about the potential scale of Bayer's inherited legal exposure. The company has now shed over 30% of its market capitalization.

Analysts and investors will be closely watching the coming trials for clues about the outcome and the scale of the potential costs for Bayer.

The first multidistrict litigation will kick off on Feb. 25 before the U.S. District Court for the Northern District of California and will federate 1,654 plaintiffs with non-Hodgkin lymphoma that have filed cases in federal courts across the country. Thursday's order applies to this and two other bellwether trials set to start later in 2019.

"This is a reasonably significant development, in our view, because this was not done in the first case that Bayer lost, where the jury was presented with evidence that will now only be allowed in phase two," UBS analyst Michael Leuchten said in research note.

Judge Chhabria said that while that type of split is unusual and should be done with caution, it was warranted in this case. He said a significant portion of the plaintiff's case involved attacks on Monsanto for attempting to influence regulators and manipulate public opinion.

While such actions could expose the company to punitive damages and liability, they were a distraction when trying to establish whether glyphosate caused a plaintiff's disease, the judge said.

The plaintiff's lawyers had opposed such a split, arguing that all the evidence should be heard together. A lawyer for the plaintiff couldn't immediately be reached for comment.

Write to Ruth Bender at Ruth.Bender@wsj.com

 

(END) Dow Jones Newswires

January 04, 2019 10:04 ET (15:04 GMT)

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