Bayer slides on €9.5bn loss caused by litigation, COVID-19 impact

Bayer counted the cost of its expensive Roundup weedkiller settlement in the second quarter with a €9.5 billion net loss made worse by lower sales in its pharma and consumer health divisions.

Group sales were down 2.5% to just over €10 billion, with pharma falling 8.8% to just under €4 billion, “weighed down” by COVID-19 and China’s new volume-based procurement policy for healthcare products.

Shares in Bayer were on the slide in mid-morning trading after the figures were announced, down a little over 3%.

In common with many of its peers, Bayer saw an uptick in pharma sales in the first quarter in part due to stockpiling of medicines as the coronavirus pandemic gathered momentum.

Like others it has also been hit by the effects of lockdowns on prescribing rates in the second quarter – with women’s health, ophthalmology and radiology products hit the hardest as consultation rates plummeted – but says it saw glimmers of a recovery at the end of the period.

There was a sizable fall for Eylea (aflibercept) for age-related macular degeneration (AMD), Bayer’s second-biggest product which declined 6% to €568 million, but the contraceptive franchise was hit hardest, down more than €110 million on the same period last year to €185 million.

Gains for top-seller Xarelto (rivaroxaban), Bayer’s oral anticoagulant, and cancer drug Stivarga (regorafenib) offset the declines, aided by the earlier return to some degree of normality in China in the second quarter as the pandemic eased.

Consumer health sales also dipped 1.9%, falling back after a strong first quarter driven by consumer purchasing over-the-counter medications amid the COVID019 crisis.  

The headline news for the German company however was the near $11 billion deal agreed in June to settle claims, inherited after its $66 billion takeover of agricultural products company Monsanto, that its Roundup herbicide causes cancer.

The settlement covered around three quarters of all current lawsuits – estimated to number around 125,000 – and also includes a capped amount for any that emerge in the future.

Taking out the settlement charge, Bayer says it would have posted a 5.6% increase in earnings to nearly €2.9 billion.

Essure litigation still lingering

While the Roundup litigation should be in its rear-view mirror, Bayer had to include a provision in its second-quarter accounts for litigation relating to birth control device Essure.

The company took a charge of more than €1.5 billion in the period “that mainly comprised expenses in connection with the Essure litigation,” with 32,000 lawsuits ongoing alleging injury from the device as of 24 July.

Plaintiffs claim birth control with Essure led to side effects including hysterectomy, pain, bleeding, weight gain, depression and unwanted pregnancies.

Looking to the full-year, Bayer says the financial impact of the COVID-19 pandemic “remains difficult to predict.”

It expects a recovery in pharma and consumer health, but doesn’t think they will bounce back to earlier forecast growth, and is trimming its group sales forecasts for the year by €1 billion to €43-€44 billion.

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