BAYN Bayer AG

By Ruth Bender 

BERLIN -- Bayer said the number of plaintiffs claiming its Roundup herbicides caused cancer had more than doubled to 42,700 in the past three months, adding pressure on the chemicals-to-pharmaceuticals company to resolve the legal battle that has raised questions about the company's future.

Bayer was thrown into one of the worst crises in its 156-year-old history after its $63 billion acquisition of Roundup inventor Monsanto Co. last year, only to face thousands of lawsuits about the herbicide.

Since August 2018, three juries have found Bayer's products caused non-Hodgkin lymphoma in people, chopping roughly 30% off the company's market value.

But while uncertainty over the outcome of the legal battle continues to cloud the company's future, Bayer shares rose more than 2% in early trading Wednesday after the company posted better-than-expected third-quarter sales and profit.

"Bayer is on track, both operationally and strategically," Chief Executive Werner Baumann said on a conference call. Mr. Baumann, who has faced heavy criticism from shareholders angry with their recent losses, highlighted progress the company has made on selling assets, making its business more profitable and boosting oversight of the legal strategy.

The new spike in plaintiffs, from 18,400 in early July, comes as Bayer and plaintiff lawyers discuss a potential settlement. Some investors, including activist hedge fund Elliott Management Corp., have urged Bayer to consider a settlement.

Bayer had warned about a sharp rise in the number of plaintiffs earlier this month. But it played down its significance, saying the numbers said nothing about the merits of the claims and blaming the latest spike on an advertising push by lawyers seeking to recruit more plaintiffs before any settlement is reached. Still, some investors worried the new surge would increase uncertainty over the total liability Bayer could face.

Besides engaging "constructively in settlement talks", Bayer had continued to defend itself in appeals and would do so too in any new trial, Mr. Baumann told reporters. He said seven to eight trials were scheduled for the first quarter of 2020.

Bayer has been arguing vigorously that Roundup and its active ingredient glyphosate are safe and that this view is backed by hundreds of regulatory decisions around the world.

Investors' hopes of a settlement have helped the stock recover slightly since the start of this year. Several trials scheduled to take place this summer and fall have been delayed, fueling hopes that settlement talks are moving ahead.

"We continue to think that a settlement is the most likely and beneficial outcome for investors," said Bernstein Research in a note to clients. Baader Bank's Markus Mayer said a settlement below $20 billion would be a positive share-price trigger.

Reaching a settlement is complicated. Mr. Baumann repeated Wednesday that the company would only agree to a settlement that is "financially reasonable" and that comes as close as possible to preventing future plaintiffs from filing suits. He declined to comment on the current state of talks.

Finding a way to prevent future claims on a product that remains on sale and that regulatory bodies across the world deem safe is one of the sticking points in mediation talks, Bayer's crop-science chief, Liam Condon, said in a recent interview.

Bayer has felt emboldened in its defense since the U.S. Environmental Protection Agency in August said it would no longer allow labels claiming glyphosate was known to cause cancer, calling this a "false claim" that misleads consumers. The EPA has found repeatedly that glyphosate wasn't a carcinogen.

In the meantime, Bayer showed its business is improving. Sales in its crop-science unit recovered from last quarter's weakness, growing 5.8% to EUR3.95 billion ($4.4 billion), driven by growth in Latin and North America.

This helped the company post an overall rise in sales to EUR9.83 billion, slightly beating analysts' expectations, according to estimates from FactSet. The number excludes the company's animal-health business, which it is selling to Elanco Animal Health Inc.

Sales in the pharmaceuticals unit, which counts for a little more than half of group sales, rose 8.2% to EUR4.5 billion, driven mostly by its two blockbuster drugs, blood thinner Xarelto and eye treatment Eylea.

Net income dropped 65% in the quarter to EUR1.04 billion, due mostly to a large divestment gain recorded in the comparable period last year.

Bayer confirmed its full-year outlook of a 4% rise in sales, reassuring analysts who had feared the targets might be dropped after Bayer in July had warned that the severe weather that affected its crop-science division could put its 2019 sales target out of reach.

Write to Ruth Bender at Ruth.Bender@wsj.com

(END) Dow Jones Newswires

October 30, 2019 07:55 ET (11:55 GMT)

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