Bayer's Roundup rally

The Supreme Court just handed Bayer a major legal victory in its yearslong Roundup battle, ruling 7-2 that the company cannot be held liable under state law for failing to include a cancer warning on the herbicide’s label.

The dispute dates back to Bayer’s $63 billion acquisition of Roundup maker Monsanto in 2018. Soon after, Missouri gardener John Durnell sued the company, claiming the herbicide caused his non-Hodgkin lymphoma and should have included a cancer warning. His case became the first in a wave of tens of thousands of similar lawsuits, fueled by a 2015 determination from the World Health Organization’s cancer agency that glyphosate, an active ingredient in Roundup, is “probably carcinogenic.”

At the heart of the ruling was federal labeling law. The Environmental Protection Agency has determined that Roundup does not require a cancer warning, and because federal law governs pesticide labels, states generally cannot require companies to add warnings that conflict with the EPA-approved label.

The company also had support from the Trump administration, which championed glyphosate production as a national security priority and ordered increased domestic production back in February.

A turning point

Today’s decision removes a major source of uncertainty for investors. The Roundup litigation has cost Bayer more than $10 billion, with the company settling roughly 130,000 claims; about 60,000 remained outstanding as of February, helping drag Bayer shares down 14.14% over the past five years. But the stock surged 17.24% today—its biggest one-day gain since 2003.

The ruling also strengthens Bayer’s position in a separate effort to resolve current and future claims. Earlier this year, the company proposed a roughly $7.25 billion class-action settlement. While that still requires court approval, today’s decision should make a favorable outcome more likely.

“The US Supreme Court decision is good for science, farmers, and industries that depend on regulatory clarity for innovation. It should help significantly contain the Roundup litigation after nearly a decade of legal battles,” Bayer said in a statement.

Bayer is finally seeing its legal strategy bear fruit, and investors are here for the harvest.—SY