Brief annoyance: Bayer stocks in sight: glyphosate lawsuits no longer shocking News

Even though the US government has advised the US Supreme Court against accepting a landmark case, and a landmark hearing before the Supreme Court is therefore unlikely, further glyphosate risks now seem manageable. In addition, the agar industry is booming and the pharmaceutical division’s prospects have improved in recent months. What’s happening at Bayer, what analysts say and what the stocks are doing.

WHAT’S UP TO BAYER:

Bayer CEO Werner Baumann had high hopes that the Supreme Court would hear glyphosate lawsuits. Check the signal effect for future plaintiffs. Hardeman received $ 25 million in damages after a 2019 lawsuit. Bayer hoped the Supreme Court would overturn the decision. But the government, represented by the so-called Attorney General, spoke out against the negotiations in mid-May. While not binding on the Supreme Court, it makes trial unlikely.

However, in the event of rejection or failure, Bayer created reserves of $ 4.5 billion last year. In addition, from 2023, the version for private buyers of Roundup herbicide in the US will no longer contain glyphosate. This should significantly reduce the risk of future lawsuits as previous lawsuits have largely come from private consumers rather than farmers.

At the end of 2021, Bayer set aside a total of $ 7.5 billion (€ 7 billion) to be able to come to an agreement with current and future applicants. Analysts believe this is realistic at this stage and initially see little or no further financial trouble in the costly litigation over the alleged cancer risk of the glyphosate herbicides Bayer brought home in 2018 with a US $ 60 billion seed purchase Monsanto dollars. Following the initial judicial disaster in the summer of 2018, the number of plaintiffs increased sharply.

In 2020, Bayer then reached an agreement in principle with the applicants, without pleading guilty. This should get most complaints out of court. According to the current annual report as of February 1, 2022, out of approximately 138,000 submitted claims, approximately 107,000 were compared or did not meet the criteria for comparison.

However, everything is going well in the day-to-day activities of the DAX group. After a long period of weaker performance following the Monsanto acquisition, the agribusiness business gained momentum in 2021. It benefits from a high demand for corn and soybeans. In addition, when their product prices are high, farmers have a greater incentive to spend money on plant protection products. Prices for the important revenue-generating glyphosate also increased sharply in late 2021. While prices have recovered somewhat recently, they are still higher than a year ago. Overall, the agricultural market environment is likely to remain good for the foreseeable future.

The agricultural department also developed significantly in the first quarter. The pharmaceutical industry was not that dynamic, but that was also due to the cost of introducing new drugs to the market, such as the kidney drug Kerendia and Nubeqa for prostate cancer. Management “only” confirmed the business projections for 2022 despite a good start to the year, but has remained deliberately conservative here. If the economic situation did not change, things would look very good, the company’s management said in a conference call with analysts in early May.

Meanwhile, Bayer’s pharmaceutical business is still dominated by two of Xarelto’s box office hits, the anticoagulant and the Eylea eye medicine. Both are delivering billions in sales that will decline in the coming years due to the loss of patents. This makes the success of new drugs even more important. For example, in the case of Nubeq, Bayer recently counted on sales of more than three billion euros per year as a result of positive research data.

The drug candidate Asundexian also plays an important role as a potential successor to Xarelto. In early April, Bayer presented positive data from a Phase II study in the treatment of patients with atrial fibrillation (abnormal heart rhythm) and at risk of stroke. Asundexian is a so-called factor XI inhibitor, still a young class of active ingredients that experts expect to have a lower risk of bleeding than current anticoagulants such as apixaban (brand name Eliquis) from Bristol-Myers Squibb (BMS) and Pfizer and Xarelto from Bayer.

In the long term, Bayer hopes to gain momentum with new gene and cell therapies. In this area, the company from Leverkusen made significant purchases and also established cooperation.

WHAT THE ANALYSTS SAY:

With the boom in agriculture and the growing success of new drugs, analysts have also become more optimistic in recent months. While the average analyst target price recorded by the news agency dpa-AFX was just below € 68 in February, it is now a good € 77. The newspapers now cost a good 61 euros. 13 out of 17 experts surveyed recommend buying it. There is no sell recommendation, only four neutral votes. Only the Oddo BHF investment house analysts see the risk of a worsening of the current price level.

Peter Verdult of the US bank Citigroup is the most optimistic with a target price of € 106. It believes that if the Asundexian anticoagulant is approved, its annual peak sales will be over $ 6 billion. Alistair Campbell of Liberum investment house also sees in the media an possibly even greater success factor than in Xarelto.

In addition to Asundexian’s potential, Michael Leuchten of Switzerland’s largest bank, UBS, highlighted in a recent study that Bayer should keep the sales gap caused by the expiration of Xarelto patents – and thus increased competition in the coming years – small thanks to new drugs that have already been approved. It is an example of a shift in opinion by many analysts as a result of good data from drug trials such as Kerendia and Nubeqa, after the patent gap has given many experts headaches in recent years.

Experts are also calm about the agricultural industry. Crop prices are likely to remain high for a while, Gunther Zechmann of Bernstein Research recently wrote. And analyst Andrew Stott, also from UBS, sees Bayer as one of the beneficiaries of the extension of the current farming cycle for the coming year. Despite historically high cost inflation, the still good profitability of agriculture speaks for this development. And Sachin Jain of Bank of America does not currently see any fundamental risks with the upcoming Supreme Court ruling, including the glyphosate law. Only one of the potentially positive price drivers is missing.

WHAT PARTICIPATION DOES:

From a provisional low of around € 44 at the end of 2021, Bayer shares benefited from better business overall. In mid-April it rose to 67.99 euros. In mid-May it dropped slightly. However, this was mainly due to a profit-taking following the price boom and the failure of the glyphosate lawsuit. Currently, it is close to the April summit. Above, the highest level in almost two years was waiting.

With a price increase of a good 43 percent, Bayer is by far the best DAX in 2022, while the leading German index has fallen by around nine percent so far.

The downward trend observed since 2015, exacerbated by failures in the glyphosate process since mid-2018, is still intact. At this stage, this would only be the case for prices above the area of ​​around € 73.

Since the first glyphosate verdict against Bayer in August 2018, the price has dropped by a good 28 percent and, based on the record high of EUR 146.45 in spring 2015, has even dropped by more than half. Even if you include the dividends paid since then, the minus is not much less. The leading German index rose 16 percent over the period.

In terms of market value, Bayer is just below the top ten of Dax with a good € 65 billion. In April 2015, the group was still at the top of the leading German index with a market capitalization of around € 120 billion. At the time, only Volkswagen could be on par with the Bayer Group in terms of stock market value. The Wolfsburg-based company is now worth nearly EUR 94 billion on the market. The leader of the DAX is the Linde gas group with 151 billion euros.

/ myl / lion / on

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