Bayer Nearing a Deal on Weed Killer Lawsuits

Bayer Nearing a Deal on Weed Killer Lawsuits
May 27, 2020

 

The shares of Bayer AG (OTC: BAYZF, XTR: BAYN) have gained almost 6% in the last two trading sessions to close at $60.77, after news reports indicated that pharmaceutical and life sciences company had made considerable progress in resolving Roundup (glyphosate-based herbicide) related lawsuits in the US. 

The Leverkusen, Germany-based company, as per a Bloomberg news report, has verbally agreed with a majority portion of roughly 125,000 US cancer lawsuits associated with the use of its Roundup weedkiller. The likely arrangements would wrap up between 50,000 and 85,000 legal cases and are a portion of a $10 billion package to terminate the lawsuits filed on the product. The amount includes $2 billion for any claims filed after the deal. The company clarified that there would not be a need to write down the value of the Monsanto takeover in case of an agreement with plaintiffs.

Bayer acknowledged the developments with the following statement: “We have made progress in the Roundup mediation discussions under the auspices of Ken Feinberg, but in keeping with the confidentiality of this process, the company will not speculate about settlement outcomes or timing.”  

As the statement indicates, Bayer refrained from providing additional details or likely timing of any revelations. However, preliminary news indicates that Roundup will be available for sale in the US market for use in farms and backyards without any cautionary statement, following an agreement with plaintiffs. Additionally, attorneys of plaintiffs would not accept new cases or claims from new clients. Sources familiar with the discussions have also stated that Bayer will probably announce the deal sometime next month.

Regarding the financial settlement, Bayer said: “As we have said previously, the company will consider a resolution if it is financially reasonable and provides a process to resolve potential future litigation.”

Bayer has been trying to arrive at a settlement over demands that its Roundup weedkiller triggers cancer. The Roundup brand came under its control when it took over Monsanto for $63 billion in 2018. As of April 14th, Bayer stated that there were 52,500 plaintiff cases. However, the company anticipates the number to increase.

Bayer believes that the plaintiff cases will increase in the weeks ahead.

The company said: “We expect these numbers will rise given the heavy plaintiff advertising –$100 million in plaintiff TV advertising in 2019 alone–combined with speculation about a settlement, factors that have driven up plaintiff numbers in the past.”

The news of a likely settlement on weed killer lawsuits, a big relief for Bayer, is expected to keep the stock range-bound with slight bullish bias in the short-term.

The historical price chart indicates that the stock of Bayer has found support at 67. The next resistance is anticipated only near 85. Additionally, the stock has closed above its 50-day moving average, while the stochastic indicator is making new highs. Therefore, we are anticipating the stock to move up in the short-term.

bayz - technical analysis - 27th May 2020

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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