Bayer Tries to Move on From Roundup

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[Putting lipstick on a pig. And, while we're at it: Cheerios, Nature Valley cereals contain Roundup ingredient, study finds. Pass me a heaping bowl of non-Hodgkin lymphoma. *RON*]

Kinsey Grant, Morning Brew, 14 June 2019

Bayer will invest $5.6 billion in developing new weedkillers over the next 10 years. Which is awfully expensive, as far as lipstick goes.

The pig it’s trying to spruce up?

Bayer’s increasingly expensive legal battles. Last year, it paid $63 million for agricultural product behemoth Monsanto, whose tentpole weedkiller Roundup has been the target of thousands of lawsuits mostly brought by people claiming the herbicide caused non-Hodgkin lymphoma.
  • For that reason, many Bayer investors have soured post-Monsanto purchase. At an April meeting, shareholders gave CEO Werner Baumann a tongue lashing—and about 55% of them refused to endorse management’s choices. Critical investors said execs clearly didn’t recognize the legal liabilities involved in buying Monsanto.
  • Bayer shares are down about 40% since the purchase.
On top of all that...glyphosate, Roundup’s active ingredient, has been so widely used in the U.S. that some weeds are developing resistance to it.

The search for alternatives is on

Bayer’s hoping to move past Roundup with a new weedkiller…via a big line-item increase. In the past, Bayer had estimated it would spend $2.7 billion on agriculture R&D. So it’s more than doubling spending to make changes to just one product.
  • And Bayer wants you to know about those plans. It took out splashy newspaper ads, including in The Washington Post.
Bottom line: The legal cases could take years to resolve, especially since Bayer has said it plans to appeal some of the court decisions resulting from the lawsuits. Analysts estimate legal costs could end up anywhere from $5.6 billion to $28 billion. The company’s future depends on a) where in that range the costs actually fall and b) coming up with a Roundup replacement.