Bayer faces a series of lawsuits “inherited” from the purchase of Monsanto for damages caused by the herbicide glyphosate. Will the company survive so many accusations?
In July last year, without knowing much about what he was up against, attorney R. Brent Wisner found himself at the forefront of an unprecedented case against Bayer AG, the German chemical giant that had recently acquired Monsanto for $ 63 billion.
Wisner's client, a 46-year-old cancer patient, a former California school district gardener, claimed that his illness had been caused by spraying hundreds of liters of Roundup, Monsanto Co.'s weed killer.
Wisner's team had compiled hundreds of documents supporting the claims and showing that Monsanto may have acted in bad faith, contacting officials from the US Environmental Protection Agency and discrediting scientists who raised questions about the safety of the plant. the company's prized herbicide.
When Wisner found himself alone in a courtroom with two of Bayer's lawyers, he asked them: “What are you doing? Why are you taking this case to trial? "To clarify the question, he added:" We are going to win, and it will be much more difficult for them to solve cases in the future.
Bayer investors probably wished the company had never allowed that case to go to trial. Or better yet, that Bayer never bought St. Louis-based Monsanto in the first place.
After a four-week trial, a San Francisco jury found that Roundup had caused Wisner's client's non-Hodgkin lymphoma and awarded him $ 289 million. (The figure was later lowered to $ 79 million.) News of the ruling wiped out $ 10 billion from the market value of Bayer's shares in a single day and opened the door to countless lawsuits against Roundup.
Over the next nine months, Bayer lost two more trials in the Bay Area.
Thousands more lawsuits are now filed each month against Bayer, and the number of plaintiffs has exceeded 18,400. Meanwhile, the company's shares have fallen 33% since the deal closed, leaving its market value at $ 68 billion, just slightly more than what was paid to buy Monsanto.
What was the company thinking?
Analysts estimate that settling all the lawsuits in the United States could cost between $ 2.5 billion and $ 20 billion. Meanwhile, Wall Street, retail investors, farmers, Bayer employees, and just about everyone else are wondering: What was the company thinking? Didn't Bayer leaders anticipate trouble when they decided to acquire Monsanto, long ranked by the Harris Poll as one of America's most hated companies? Did they really think the Roundup litigation would not be a problem? And can Bayer survive this self-inflicted wound?
"All of this could have been hidden in an orderly, silent way three years ago, with a deal for less than a billion dollars, even for half of that," Wisner is surprised. "What I've seen from the beginning in all of this litigation is a level of arrogance that never ceases to amaze me."
Why did you buy from Monsanto?
By 2016, Bayer faced a dilemma. The successful cardiovascular and eye care drugs that had driven him to market stock had less than a decade of patent rights, and the "powerhouse" of innovative drugs was running low. Meanwhile, its agriculture division faced increasing competition due to consolidation within the industry itself. Dow Chemical Co. had recently partnered with DuPont Co., and China National Chemical Corp. had joined Syngenta AG of Switzerland.
Inside Bayer, some were concerned that a foreign entity might stage a hostile takeover and split the empire. To strengthen the company's portfolio, Baumann began to think about buying Monsanto, a possibility that he had been investigating since at least 2011.
Bayer had long specialized in chemicals used by farmers to combat fungi, weeds and insects, but it lacked a world-class seed business. Monsanto had dominated the seed industry since revolutionizing the industry in the 1990s by introducing genetically engineered corn, soybean and cotton seeds to resist glyphosate, the active ingredient in Roundup.
By the time Bayer reached an acquisition agreement in September 2016, 120 non-Hodgkin lymphoma lawsuits had been filed against Monsanto. That didn't worry Baumann too much. He was less interested in Roundup than in GMOs and the American company's digital farming operations, which implement satellites, drones, infrared imaging and GPS-controlled tractors to help farmers make better planting decisions. That said, Monsanto's weeding business, which made $ 3.7 billion in 2017, was an attractive enough source of income for Bayer to comply with antitrust regulators by selling its own flagship herbicide, called Liberty, and the most of its seed business to German rival BASF SE for $ 7 billion.
Glyphisate and cancer
Patented by Monsanto in the early 1970s, glyphosate has been called the Holy Grail of herbicides for its efficiency in suppressing weeds and expanding crops. After Monsanto introduced its glyphosate-resistant Roundup Ready seeds in 1996, glyphosate use skyrocketed fifteen times. By 2014, farmers were spraying almost 1 liter for every hectare of arable land in the US and almost half a liter for every hectare worldwide.
Before the acquisition, Monsanto claimed on a website that glyphosate is "about half as toxic as table salt and more than 10 times less toxic than caffeine." The compound has gained repeated approval from regulatory agencies around the world, including in Australia, Canada, the European Union, Japan, and the U.S. Many farmers view glyphosate as crucial to affordably feeding a growing population in a rapidly warming planet.
Still, there were many warning flags. In March 2015, the International Agency for Research on Cancer (IARC), an arm of the World Health Organization based in France, convened 17 experts from 11 countries. They reviewed all the publicly available research on glyphosate (about 1,000 studies) and concluded that it is "probably carcinogenic to humans." Although the IARC does not have regulatory power, the findings opened the door for litigation in the United States and around the world. The IARC also states that glyphosate-based formulations, including Roundup, are often more toxic than glyphosate alone.
In 2017, when Baumann surveyed scientists at Bayer's pharmaceutical unit in Berlin, several said they believed Roundup could cause cancer. And by the time the acquisition was completed, plaintiffs' teams of attorneys had forced the release of more than 400 internal Monsanto documents, the so-called Monsanto Papers, illustrating how the U.S. company undermined serious security concerns dating back to 1984.
In 2016, the EPA assembled a panel of outside scientists to conduct a peer review on that agency's conclusion that glyphosate is safe. Eight of the 15 panelists expressed significant concerns about the EPA's stance, and three others questioned data submitted by Monsanto and other pesticide manufacturers. The final EPA report, which largely validated the agency, obfuscated these apprehensions.
"If the EPA financed a long-term rodent study on Roundup tomorrow, it would regain a lot of credibility," Wisner says. “It would show that they are actually willing to consider what causes cancer. But they are not ”.
The first judgment won
Four weeks later, in a packed room, the jury awarded Johnson $ 289 million. "I started crying," Wisner recalls. "And I looked at the jurors, and three of the jurors were crying. He looked at the court reporter, and she was crying as she tried to write the transcript. Lee was crying. … It was very strong".
Whatever happens, Roundup is rapidly falling out of favor. In the United States, the supermarket chain Costco Wholesale Corp. removed it from its shelves. Politicians from Austria to India are calling for bans on glyphosate, while Belgium, Canada and other countries are restricting its use. The EU can simply allow the herbicide authorization to expire in 2022.
Yet millions of farmers still trust Roundup, arguing that glyphosate-free products could be worse for the environment. When reporters recently visited Bayer's Crop Science Division, employees backed Baumann, saying the Roundup litigation is not only misplaced, but also a distraction from the company's much-needed mission to develop agricultural technology. to produce more food on less land. "A challenge that continues to grow more and more," said Condon, head of that division.
By taking over Monsanto, Baumann continued, Bayer possesses unmatched technology and resources to sustainably meet the growing challenges of the agricultural industry. In other words, he has no regrets about buying the hated American company. "Regardless of what the legal convictions say, I would not sleep well, and certainly would not be sitting here representing the company, if a major mistake had been made under my 'watch.'
By Caroline Winter and Tim Loh
Collaborative translation by Anabel Pomar.
Source: Monsanto Papers