By Ludwig Burger and Patricia Weiss
FRANKFURT (Reuters) - Shares in Bayer (ETR:BAYGN) dropped as much as 5.7% on Monday after the embattled German company was ordered to pay $2.25 billion in damages, the highest amount yet in its ongoing litigation linked to an alleged carcinogenic effect of its Roundup weedkiller.
A jury in a Philadelphia court on Friday ordered Bayer to pay $2.25 billion to a Pennsylvania man who said he developed cancer from exposure to the Roundup weedkiller, based on the chemical glyphosate.
Shortly after the 0800 GMT open, Bayer shares fell 5.7% to their lowest in about eight weeks, before trimming the losses to last trade down 4.6%. They have lost 70% of their value since the company bought Monsanto (NYSE:MON) in 2018.
The total amount includes $2 billion in punitive damages, which are likely to be reduced on appeal because they exceed U.S. Supreme Court guidance, but the verdict poses an added headache for CEO Bill Anderson, who is cutting management jobs in a bid to speed up how business decisions are made.
Anderson is also in the process of reviewing the group's diversified structure, which is unpopular with many investors, but will likely hold off presenting break-up plans at an investor update scheduled for early March, people familiar with the matter have told Reuters.
Bayer, which is burdened by financial debt and lack of free cash flow, said it remains committed to taking cases to trial, citing a record of having won 10 of the last 16 cases at trial.
In 2020, Bayer settled most of the Roundup cases that were pending at the time for up to $9.6 billion but failed to get court approval for an agreement to prevent future cases. More than 50,000 claims now remain pending.
"A new settlement would unfortunately not put an end to glyphosate litigation because in one to two years, new plaintiffs would again be knocking on Bayer's door," said portfolio manager Markus Manns of mutual funds company Union Investment.
Among the measures to head off further claims, Bayer has moved to phase out the use of glyphosate in products for non-professional gardeners, but new plaintiffs have based their claims on years of prior use.
Bayer continues to sell glyphosate-based weedkillers to farmers, who rely on it heavily and who according to Bayer play a negligible role in the litigation.
Anderson, at the helm since June last year, has adopted his predecessor Werner Baumann's tough stance regarding further settlement deals.
Among other challenges he faces is a weak U.S. corn seed business, a drop in prices of glyphosate weedkillers and a recent failure of a key trial testing a once-promising new anti-clotting drug.