The Monsanto acquisition ranks with AOL Time-Warner as one of the worst deals in history.
From Bloomberg Opinion, November 20:
Bayer Woes Make a Monsanto Break Harder Not Easier
The German drugmaker is now reeling from lab setbacks as well as Roundup litigation. An oft-mooted separation would just create two struggling businesses.
Bayer AG shareholders may be inured to the rising costs of litigation over the Roundup weedkiller the German company inherited with the 2018 takeover of GMO specialist Monsanto. But now a worry about Bayer’s other main business — pharmaceuticals — has come to the fore. New Chief Executive Officer Bill Anderson could face intensifying calls to do a breakup. The snag is that would just create two struggling businesses out of one.
Shares in Bayer fell as much as 21% on Monday, wiping €8.7 billion ($9.5 billion) from its market capitalization and taking the loss of value from just before the Monsanto deal leaked to €66 billion — effectively wiping out the full cost of the deal. One reason for Monday’s drop was disappointing clinical trial data for anti-thrombotic drug asundexian. This was compounded by a $1.5 billion award against Bayer in the latest lawsuit brought by three Roundup users claiming it caused their cancers. (Bayer has defended the safety of glyphosate, the active ingredient in the product).
The €33 billion company has three main businesses — crop science, pharmaceuticals and consumer healthcare. The clinical setback is so shocking because investors have been looking to asundexian and other prospects to replace revenue that will be lost as anti-stroke treatment Xarelto loses patent protection. The more bullish analysts have argued that Bayer’s ability to cope with patent expirations has been underestimated by the market; the average analyst target price for the company at the end of last week was 50% higher than where it closed. Investors will now find this argument even harder to swallow.
The Roundup award may be reduced on appeal, says Bloomberg Intelligence analyst Holly Froum. Even so, the news suggests complete closure on Monsanto litigation via a decisive settlement will remain elusive. Holdouts have resisted participating in existing agreements on thousands of claims. Every case the company loses will embolden them. The effect will be long-running litigation for the years ahead....
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