BAYN Bayer AG

By Ruth Bender 

BERLIN -- Bayer AG 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 its 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 herbicides.

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

While uncertainty over the legal outcome still cloud the company's future, Bayer shares rose more than 2% Wednesday after it posted better-than-expected third-quarter sales and profit.

"Bayer is on track, both operationally and strategically," Chief Executive Werner Baumann said. 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 legal strategy.

The 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 settling.

Bayer had warned about a sharp rise in plaintiffs earlier in October, but played down the significance, saying the numbers said nothing about the size of any settlement payment or the merits of the claims.

It blamed the spike on an advertising push by lawyers seeking to recruit more plaintiffs before any settlement is reached. Investors worried the surge could push up the final bill for Bayer.

Besides engaging "constructively" in settlement talks, Bayer has continued to defend itself in appeals and would do so in any new trial, Mr. Baumann told reporters.

Bayer has argued 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 forward.

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

Reaching a settlement is complicated, especially as Roundup continues to be sold in stores, making it hard to reach an agreement that would prevent future plaintiffs from coming forward. The spike in plaintiffs has made a resolution even more challenging, as Bayer faces more plaintiff lawyers, said Thomas Claps, a litigation analyst for Susquehanna Financial Group.

Mr. Baumann repeated Wednesday that the company would only agree to a "financially reasonable" settlement. He slightly changed tone on his expectation that any settlement should reach "finality," saying a settlement must come as close as possible to "finality."

According to a person familiar with the mediation discussions, Bayer and plaintiff lawyers are still far apart on the amount and scope of a potential settlement. Mr. Baumann declined to comment on the current state of the talks.

Meanwhile, Bayer's 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 EUR9.8 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 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. This reassured analysts, given that Bayer warned in July that the severe weather that affected its crop-science division could put its sales target out of reach.

Sara Randazzo contributed to this article.

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

(END) Dow Jones Newswires

October 30, 2019 11:37 ET (15:37 GMT)

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