Is Bayer crash just the beginning?

A shareholder arrives at Bayer’s annual general meeting in Bonn, Germany, May 25 as people protest against the merger of the pharmaceutical and chemical maker with U.S. seeds and agrochemicals company Monsanto. A recent court ruling that it inherited from Monsanto has slashed Bayer’s share value. |  REUTERS/Wolfgang Rattay photo

It’s like Bayer is waking up with a giant hangover, finding a painful brand on its butt that might not fade away.

The German crop science giant has taken over Monsanto, but its rebranding of the much-maligned American company is being greatly complicated by a massive jury award against it, one that came only days before Bayer’s official absorbing of Monsanto.

And the US$289 million penalty is being followed by thousands more claims from people who say glyphosate has hurt them.

“Bayer beware,” joked food science professor Sylvain Charlebois of Dalhousie University.

“The baggage is real.”

Investors bailed on Bayer following the jury award, which accepted claims that a groundskeeper was given cancer by the herbicide, hammering down its shares by 11 percent on one day alone.

A bigger issue for agricultural biotechnology is whether this sort of risk and vexation with a generally-considered-safe product will dissuade companies from investing in the area. One of the prime reasons for the acquisition of Monsanto was providing Bayer with enough size, capital and resources to fund enormously expensive research and development projects.

Other biotech giants have been following the same path with Dow and DuPont merging and ChemChina swallowing Syngenta.

For years agricultural conferences have heard from the majors that new biotech innovations are so costly that they often don’t feel that they can take on development risks at their current sizes.

New pesticides and new genetic traits can cost tens of millions to more than 100 million dollars each and take a decade to develop.

If an avenue of research leads to a dead end, that’s a huge amount of investment to write off.

The disappearance of Monsanto as a standalone giant, as well as the other mergers, helps concentrate the major players in agricultural global biotechnology development.

But along with the increased size and depth comes increased risk, at least in Bayer’s case. The bad reputation Monsanto couldn’t shake now risks tarring Bayer’s 155-year legacy, even as Bayer attempts to bury the Monsanto name. Dedicated activists might not give up their crusades against biotechnology just because Monsanto is gone.

“That menace doesn’t exist anymore so they’re trying to regroup,” said Charlebois.

“It could give a chance to interest groups to define a new menace, which would be Bayer.”

So far Bayer’s problem with the Monsanto legacy doesn’t seem to have infected the other giants. Dow-DuPont, for example, was mostly unaffected by the jury verdict.

But with research and development projects consuming years of work and capital, how painful the Monsanto hangover is for the entire sector remains to be seen.

For now, it’s mostly Bayer having to cope with what it has swallowed.

“Bayer … may have misjudged how much the Monsanto brand has been damaged,” said Charlebois. “More (court cases) are to come and Bayer is in for a huge fight, I think.”

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