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Bayer : Shares Jump After U.S. Court Calls for New Roundup Trial

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10/11/2018 | 01:51pm CET

By Ruth Bender and Jacob Bunge

BERLIN -- Bayer AG shares jumped Thursday after the company scored a provisional win in its rejection of a record jury award to a plaintiff who sought to hold the maker of Roundup weed killers liable for his non-Hodgkin lymphoma.

Shares in the German chemicals and pharmaceuticals firm were trading up 4.7% midmorning, clawing back some of the sharp losses since a California jury in August ordered Monsanto, now owned by Bayer, to pay a total of $289 million in a landmark lawsuit over whether its weed killers cause cancer.

Investors took relief after California Judge Suzanne Ramos Bolanos on Wednesday issued a tentative ruling for a new trial on the $250 million in punitive damages awarded to plaintiff Dewayne Johnson in the jury verdict that had spooked investors the company could face billions in potential plaintiff payouts.

Judge Bolanos wrote in the order that Mr. Johnson's attorneys didn't provide "clear and convincing evidence of malice or oppression by Monsanto," a point investors and analysts took as a step toward victory for Bayer.

A spokeswoman for Baum Hedlund Aristei & Goldman PC, the law firm representing Mr. Johnson, declined to comment.

Despite the momentary reprieve, investors and analysts caution that the tentative ruling is just one step in a legal battle whose outcome remains highly uncertain.

"The Judge's comments in the tentative ruling are more constructive than we had anticipated," said Bernstein analyst Gunther Zechmann. "Punitive damages are likely to be reduced significantly."

"On a best-case scenario this obviously provides the company a possibility it could win the retrial," Jefferies analysts wrote in a note to investors.

For Bayer, obtaining a new trial or achieving a significant reduction in punitive damages is crucial as the company is in the middle of one of the most important transformations in its corporate history with its recent $63 billion purchase of Monsanto, the U.S. seed and pesticide giant that manufactures Roundup and crop seeds engineered to withstand the spray.

Bayer is under pressure to succeed Monsanto's integration and deliver on promised benefits following an arduous and longer-than expected regulatory review that forced Bayer to shed more assets than planned. The jury verdict hit Bayer a week before the German company was allowed to officially take over Monsanto.

Bayer is up against more than 8,700 similar cases from plaintiffs alleging that glyphosate, the main compound in Bayer's Roundup herbicide, causes cancer. Next cases are set to start in February. It also isn't yet clear when Judge Bolanos may complete the ruling and Mr. Johnson is likely to appeal if it is completed.

"The message of this ruling is relatively strong and could influence other jurors. But you can't call an all-clear yet," said Manfred Manns, portfolio manager at Union Investment, which holds roughly 1% in Bayer. Besides the outcome of the legal cases, Mr. Manns said, Bayer will have to succeed in turning around Monsanto's poor image.

If completed, Wednesday's ruling would grant a motion by Bayer arguing that the amount of damages awarded wasn't justified and that the evidence didn't prove the company intended to harm the plaintiff.

Bayer executives had been surprised by the high sum awarded by the jury and considered that jurors had been swayed by overly emotional and speculative arguments from the plaintiffs' lawyers, according to people familiar with the matter. Bayer employees in recent weeks have also grown nervous about the sharp fall in Bayer's stock price as most hold shares in the company, the people said.

Lawsuits over Roundup were prompted by the International Agency for Research on Cancer, a unit of the World Health Organization, in 2015 classifying glyphosate as likely having the potential to cause cancer. Monsanto and other agricultural groups have been pushing back, pointing to studies by academics and agencies like the U.S. National Institutes of Health and Environmental Protection Agency that showed no cancer risk.

Bayer on Thursday said the ruling backed its view that the verdict was at odds with science proving glyphosate is safe.

"The jury's verdict was wholly at odds with over 40 years of real-world use, an extensive body of scientific data and analysis, including in-depth reviews by regulatory authorities in the U.S. and EU, and approvals in 160 countries, which support the conclusion that glyphosate-based herbicides are safe when used as directed and that glyphosate isn't carcinogenic," Bayer said in a statement.

Bayer said the judge is also considering the company's motions for a new trial on the liability verdicts and reduction of the $39 million in compensatory damages the jury awarded.

Write to Ruth Bender at Ruth.Bender@wsj.com and Jacob Bunge at jacob.bunge@wsj.com

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Financials (€)
Sales 2018 39 269 M
EBIT 2018 7 353 M
Net income 2018 4 886 M
Debt 2018 38 892 M
Yield 2018 4,47%
P/E ratio 2018 11,59
P/E ratio 2019 13,21
EV / Sales 2018 2,48x
EV / Sales 2019 2,04x
Capitalization 58 611 M
Duration : Period :
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Technical analysis trends BAYER
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Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 26
Average target price 94,1 €
Spread / Average Target 50%
EPS Revisions
Werner Baumann Chairman-Management Board
Werner Wenning Chairman-Supervisory Board
Wolfgang U. Nickl Chief Financial Officer
Katharina Jansen Head-Science & Research
Hartmut Klusik Head-Human Resources, Technology & Sustainability
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