Shares of Bayer (BAYRY) trading in New York are sliding after the recently acquired Monsanto was ordered to pay $289M by a California court, who found it liable in a lawsuit alleging that the company’s Roundup caused cancer. Commenting on the news, JPMorgan analyst Richard Vosser told investors that the selloff in the shares is “significantly overdone” as he sees the potential for the verdict to be overturned on appeal and for the damage amount to be greatly reduced. Meanwhile, his peer at Bank of America Merrill Lynch argued that the ruling adds cloud over an important product for Scotts Miracle-Gro (SMG).
ROUNDUP RULING: Last week, a jury found Monsanto, which was recently acquired by Bayer for $63B, liable in a lawsuit alleging that the company’s glyphosate-based weedkillers, including its Roundup brand, caused cancer. The case against Monsanto is the first of more than 5,000 similar lawsuits across the U.S. The jury at San Francisco’s Superior Court of California found that Monsanto had failed to warn school groundskeeper Dewayne Johnson and other consumers of the cancer risks posed by its weed killers, and awarded Johnson $250M in punitive damages and about $39M in compensatory damages. Monsanto, which plans to appeal the verdict, has denied that glyphosate causes cancer and has contended that decades of scientific studies have shown the chemical to be safe for human use.
SELLOFF ‘SIGNIFICANTLY OVERDONE’: In a research note to investors, JPMorgan’s Vosser said he views the selloff in shares of Bayer after a California jury ordered the company’s Monsanto unit to pay $289M for not warning of cancer risks posed by its weed killer, Roundup, as “significantly overdone.” The analyst added that he sees the potential for the verdict to be overturned on appeal and for the damage amount to be greatly reduced. Overall, Vosser believes current share levels of Bayer provide a good long-term buying opportunity and reiterated an Overweight rating on the name.
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