Bayer to consider ending US retail sales of weedkiller glyphosate

German chemical group Bayer will consider withdrawing its weedkiller glyphosate from the American retail market after a US court dismissed its $2bn plan to settle future claims from cancer patients who used the product.

The decision by San Francisco district judge Vince Chhabria is a blow to attempts by Bayer chief executive Werner Baumann to draw a line under the legal fallout from its $63bn takeover of US seedmaker Monsanto in 2018, which exposed the German company to the glyphosate claims.

Shares in Bayer fell almost 5 per cent in morning trading on Thursday.

The US court on Wednesday dismissed Bayer’s proposed plan as “clearly unreasonable”.

The decision also raises questions about a $9.6bn settlement for 125,000 existing claims and lawsuits from users of the weedkiller, which is sold under the brand name Roundup, who attribute their cancer to the product. Bayer insists that glyphosate poses no health threat.

Markus Manns, a funds manager at Union Investment, Germany’s third-largest asset manager, said the court’s rejection was a “significant setback for Bayer”.

In a statement published early on Thursday, Bayer announced it would “discuss the future of glyphosate-based products in the US residential market”.

“None of these discussions will affect the availability of glyphosate-based products in markets for professional and agricultural users,” the company added.

Glyphosate sales to US consumers, mainly under the Roundup brand, account for €300m of Bayer’s annual revenue, less than 2 per cent of overall sales by its crop science unit.

Liam Condon, the head of the unit, told analysts and journalists on a call on Thursday morning that he expected no financial impact from ending glyphosate sales to US consumers. Bayer would keep the Roundup brand name but change its active ingredients, he added.

The group also said that the court decision would be positive for its cash flow this year and next because payouts for some claims would be delayed. The company will stick to its $2bn provision booked for the settlement of future claims but warned investors that this number may change.

“We will continue to review the amount of the provision diligently,” Baumann said, adding that the financial fallout would hinge “on a number of factors” including the outcome of a US Supreme Court case.

Roundup is a blockbuster product that was developed by Monsanto in the 1970s. It is highly effective and works in tandem with genetically modified crops that are resistant to the herbicide and also sold by the seedmaker.

Bayer’s acquisition of Monsanto was the biggest in its history and has weighed heavily on its share price. Since the first reports of a potential deal between the two in 2016, Bayer has lost €37bn, or 40 per cent, of its stock market value.

Bayer has been involved in legal battles over glyphosate since August 2018, when a California court issued the first ruling linking Roundup to cancer. It has since lost several other Roundup cases, with juries awarding substantial damages in some cases.

Bayer said that if it did stop selling glyphosate to US retail customers, it would not be because of safety concerns but to reduce the risk of litigation.

“Regulators around the world continue to conclude that glyphosate-based Roundup products can be used safely and are not carcinogenic, and we are just as confident in their safety,” said Baumann. The product has been the target of criticism from environmental campaigners for years.

Baumann also said that Bayer was now looking at “alternative solutions to manage potential future claims”, adding that 96,000 of the 125,000 existing claims “have been finalised, are in the final stages of resolution or involve claims that are not eligible”. Between January and March 2021, Bayer paid out about €2.2bn to settle litigation.

The company said the “ongoing efforts to settle existing claims will be reassessed”.