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MarketScreener Homepage  >  Equities  >  Nyse  >  Merck & Co., Inc.    MRK

MERCK & CO., INC.

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Roundup cancer verdict sends Bayer shares sliding

08/13/2018 | 09:39am EST
FILE PHOTO: Monsanto Co's Roundup shown for sale in California

FRANKFURT (Reuters) - Bayer shares plunged as much as 14 percent on Monday, losing about $14 billion in value, after newly acquired Monsanto was ordered to pay $289 million in damages in the first of possibly thousands of U.S. lawsuits over alleged links between a weedkiller and cancer.

After the verdict in favor of a California school groundskeeper with terminal cancer, Monsanto faces more than 5,000 similar lawsuits across the United States over claims it did not warn of the cancer risks of glyphosate-based weedkillers, including its Roundup brand.

Monsanto, bought by Bayer this year for $63 billion, said that it would appeal against the jury's verdict in California, which is the latest episode in a long-running debate over claims that exposure to Roundup can cause cancer.

The case by plaintiff Dewayne Johnson, filed in 2016, was fast-tracked for trial due to the severity of his non-Hodgkin's lymphoma, a cancer of the lymph system that he alleges was caused by Roundup and Ranger Pro, another Monsanto glyphosate herbicide.

"The jury's verdict is at odds with the weight of scientific evidence, decades of real world experience and the conclusions of regulators around the world that all confirm glyphosate is safe and does not cause non-Hodgkin's lymphoma," Bayer said in a statement.

Having closed the Monsanto takeover, Bayer is only awaiting the approval of some final antitrust-related asset sales before folding it into its own organization. It did not negotiate any payments from Monsanto shareholders for Roundup-related litigation.

Bayer shares were down 11.2 percent at 82.93 euros at 1320 GMT, the worst performing stock on the Stoxx Europe 600 index <.STOXX>, and on track to close at their lowest in almost five years.

Barclays analysts said Bayer was in for a "litigious headache".

"Whilst an appeal is certain and may indeed likely result in the penalty being moderated at a minimum if not reversed altogether, a large number of similar pending cases will now likely multiply."

Berenberg analyst Alistair Campbell said resolving the issue could cost Bayer $5 billion, citing a rough estimate based on a past product liability settlements such as Merck & Co Inc's $4.9 billion settlement over painkiller Vioxx or Bayer's $4.2 billion total settlement over the Baycol cholesterol drug.

The controversy could also affect future revenues.

Genetically modified (GM) crops that withstand glyphosate are a main source of cash for Monsanto, mainly generated in North and South America, where the technology is widely accepted.

The health worries could further darken the outlook for a product category following the emergence of weeds that have grown resistant to the herbicide.

"We think the risk of withdrawal is extremely low, but if it materialized it would be a major blow to the transaction value paid for the company," said Berenberg's Campbell.

SCIENTIFIC DEBATE

Discovered by the Monsanto chemist John E. Franz in 1970, patent-free glyphosate herbicides are now sold by the global crop protection industry despite the dispute over its safety.

The U.S. court ruling caught many Bayer investors off guard as no hard evidence of a causal link to cancer had been produced so far.

The World Health Organization's (WHO) cancer arm in 2015 classified glyphosate as "probably carcinogenic to humans", but the U.S. Environmental Protection Agency in September 2017 concluded a decades-long assessment of glyphosate risks and found the chemical was not likely carcinogenic to humans.

A Reuters report in October showed that the WHO's cancer agency dismissed and edited findings from a draft of its review of glyphosate that were at odds with its final conclusion that the chemical probably causes cancer.

In Europe, the EU Commission in December drew criticism for renewing the license for glyphosate. Germany and France have meanwhile taken steps to phase out use of the weedkiller.

The U.S. case may prompt some retailers to curb sales of Roundup products. Homebase, one of Britain's largest home and garden improvement retailers, is reviewing the sale of glyphosate-containing products in the light of the jury’s decision, a spokeswoman said.

Glyphosate-exposed stocks also plunged in Asia and particularly in Australia where a withering drought has already hit herbicide sales.

Australian chemical maker Nufarm Ltd, which Macquarie Bank analysts estimate earns about a fifth of its revenue from glyphosate-based products, plunged almost 17 percent to a more than two-year low.

Its top shareholder, Japan’s Sumitomo Chemical Co Ltd, shed 3 percent, while Australian rural services firm Elders Ltd, which retails herbicides, fell 11 percent.

(Additional reporting by Tom Westbrook in Sydney, Ben Hirschler in London, Yuka Obayashi in Tokyo; Editing by David Goodman/Keith Weir)

By Ludwig Burger


© Reuters 2018
Stocks mentioned in the article
ChangeLast1st jan.
BAYER AG -0.84% 52.25 Delayed Quote.8.50%
DEERE & COMPANY -2.46% 295.4 Delayed Quote.9.79%
DRAFT INC. 1.56% 1040 End-of-day quote.-10.81%
ELDERS LIMITED 1.42% 10.71 End-of-day quote.8.62%
MERCK & CO., INC. 1.47% 83.38 Delayed Quote.1.93%
NUFARM LIMITED 1.94% 4.2 End-of-day quote.2.44%
SUMITOMO CHEMICAL COMPANY, LIMITED -0.93% 428 End-of-day quote.3.13%
WORLD CO., LTD. -1.33% 1258 End-of-day quote.0.40%
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Financials (USD)
Sales 2020 48 200 M - -
Net income 2020 12 144 M - -
Net Debt 2020 15 159 M - -
P/E ratio 2020 17,6x
Yield 2020 2,94%
Capitalization 211 B 211 B -
EV / Sales 2020 4,69x
EV / Sales 2021 4,32x
Nbr of Employees 71 000
Free-Float 70,7%
Chart MERCK & CO., INC.
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Merck & Co., Inc. Technical Analysis Chart | MRK | US58933Y1055 | MarketScreener
Technical analysis trends MERCK & CO., INC.
Short TermMid-TermLong Term
TrendsBullishNeutralNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 22
Average target price 96,95 $
Last Close Price 83,38 $
Spread / Highest target 28,3%
Spread / Average Target 16,3%
Spread / Lowest Target 1,94%
EPS Revisions
Managers and Directors
NameTitle
Kenneth C. Frazier Chairman, President & Chief Executive Officer
Robert M. Davis CFO & Executive Vice President-Global Services
Sandy Tremps Vice President-R&D IT CIO
Thomas Henry Glocer Independent Director
Leslie A. Brun Lead Independent Director
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