Virus Crimps Bayer After Roundup Deal Causes $11 Billion Loss

(Bloomberg) -- Bayer AG said the pandemic is crimping demand for some of its medicines, seeds and herbicides, adding to concerns over unfinished business in its effort to move on from lawsuits over the weedkiller Roundup.

Bayer shares dropped as much as 4% on lower earnings guidance for the full year. The stock has slumped in the past six weeks amid concern that a U.S. settlement hasn't entirely resolved Roundup litigation, whose costs contributed to a net loss of 9.5 billion euros ($11.2 billion) for the second quarter.

Bayer, which got the blockbuster herbicide with its purchase of Monsanto, remains “strongly committed” to reaching deals that bring the roughly 125,000 U.S. lawsuits to a conclusion and take care of the risk of future litigation, Chief Executive Officer Werner Baumann said on a call with analysts.

Bayer and plaintiff attorneys last month pulled a $1.25 billion plan to resolve future Roundup suits after a federal judge questioned their proposal. Bayer insists the product is safe.

Court's Concerns

While Bayer is working to address the court's concerns as fast as possible, it can't estimate when it'll have a new plan to handle future Roundup lawsuits because of the “number of parties involved and the complexity of the issues,” Baumann said on the call. “We are optimistic and we continue to make progress and will see what the next weeks yield.”

The quarterly loss, which also included other litigation costs, compared with a profit of 404 million euros a year earlier. Discussions for a settlement regarding Bayer's contraceptive device Essure -- the result of another acquisition -- have made “good progress” in recent weeks and Bayer recorded a special charge of about 1.2 billion euros ($1.4 billion) for litigation related to the product, the company said.

Core earnings per share will probably be between 6.70 euros and 6.90 euros this year when taking the coronavirus outbreak into account, the Leverkusen, Germany-based company said. An earlier forecast whose range was 30 cents higher excluded the health crisis's impact.

The slowdown in surgeries and other non-essential medical procedures hurt some products in Bayer's pharma division in recent months. Sales fell for the blockbuster eye treatment Eylea while revenue for top-selling blood thinner Xarelto only grew at half the pace of last year. There could be relief there in coming months as medical systems around the world learn to cope with coronavirus patients while also handling more routine matters.

The crop science division will probably take a pandemic-related hit in the fourth quarter as demand shrinks for biofuels in the U.S., Liam Condon, head of the division, said on the analyst call. The lower levels of ethanol production means that about 680 million bushels of corn aren't needed, or about 4 million acres of cornfield, Condon said.

Bayer now expects sales of 43 billion euros to 44 billion euros this year, a range that's 1 billion euros below the previous target. The outlook is lower than most analysts had expected, according to Markus Mayer, an analyst at Baader Bank.

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