Bayer (BAYNGR; Baa2 Neg, BBB S, BBB S) {BAYN GY Equity}

Bayer cuts Nov jury verdict from €1.6b to €600m (-60%), lower than historical 90% reduction on initial verdicts; € lines led Pharma tightening last week, we think current pricing in-line with one-notch lower Viatris/VTRS is fair.

• Headlines late on Friday was that a Missouri Judge had slashed the $1.56b initial verdict against Bayer (from late Nov) to $611m - payout is for 3 people who claimed Roundup caused cancer. Bayer reportedly said it will appeal the results noting it has historically achieved a avg. 90% reduction in awards (Fridays was -60%).
• Re. impact on provisions; company had €6.5b at the end of last year & raters are largely sticking to this; Fitch assuming €5.8b over 2024-27 (~€1.45b/yr) & S&P assuming €1.5-€2b/yr for cash litigation settlements for both Roundup and PCB. Fitch noted Bayer had not provisioned for PCB yet - we don't see breakdown in company reporting to confirm that.
• Bloomberg litigation analyst still see Bayers' Roundup litigation exposure at least $16b - analyst noting the 11th circuit refusal (including on appeal in early Feb) to pre-empt state law claims on Federal statue as causing upside risk to that estimate. The analyst are assuming high case numbers ($16b if 200k cases are filed) vs. the 54k remaining (of 167k total) that S&P has Bayer indicating in March.