Bayer’s Remorse

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What's going on?

German pharmaceuticals and life sciences giant, Bayer – inventor of aspirin and commercializer of heroin (oops) – reported second-quarter results on Wednesday that gave investors a headache. Its stock fell by 2%.

What does this mean?

Bayer’s been tangled up in its drawn-out $63 billion acquisition of agricultural biotechnology company, Monsanto (maker of alleged killer weed killer, Roundup) – the ink on the deal finally dried in June. Bayer said that its profit for the year, excluding Monsanto’s contribution, would be higher than it had previously forecast – but, including Monsanto, it’d be lower. As Monsanto’s earnings were only included since June, Bayer missed out on Monsanto’s traditionally bigger first half of the year.

The addition of Monsanto to Bayer’s lineup will make the historical drugmaker as reliant on agricultural sales as it is on pharmaceutical sales. Profit at Bayer’s combined crops business nearly doubled compared to a year ago, partially offsetting falling profit in its consumer health business (where it sells things like antihistamine, Claritin, and stomach settler, Alka Seltzer).

Why should I care?

The bigger picture: Bayer’s inherited Monsanto’s problems.

Last month, a California court ordered Monsanto (i.e. Bayer) to pay $289 million in damages after health concerns over Roundup and another herbicide – both of which are glyphosate-based products (more below). That settlement was for one case, and there are about 8,700 more outstanding. And this has all come to light after Bayer agreed to buy Monsanto. Bayer’s share price plummeted after the verdict.

For you, personally: Hero or villain?

Glyphosate is a hot topic. Some research says that it probably causes cancer. Other research says that it probably doesn’t. Bayer thinks it’s fine, and plans to contest the court ruling. The history of pharmaceuticals is rife with similar uncertainty – like morning sickness drug, thalidomide, which turned out to cause birth defects, and weight loss drug, fen-phen, which was found to cause heart disease. The jury’s still out on glyphosate…

Originally posted as part of the Finimize daily email.

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