Legal Risks

As a global company with a diverse business portfolio, the Bayer Group is exposed to numerous legal risks, particularly in the areas of product liability, competition and antitrust law, anticorruption, patent disputes, tax assessments and environmental matters. The outcome of any current or future proceedings cannot normally be predicted. It is therefore possible that legal or regulatory judgments or future settlements could give rise to expenses that are not covered, or not fully covered, by insurers’ compensation payments and could significantly affect our revenues and earnings.

Legal proceedings currently considered to involve material risks are outlined below. The legal proceedings referred to do not represent an exhaustive list.

Product-related litigation

Mirena™: As of January 28, 2019, lawsuits from approximately 2,360 users of Mirena™, a levonorgestrel-releasing intrauterine system providing long-term contraception, had been served upon Bayer in the United States (excluding lawsuits no longer pending). Plaintiffs allege personal injuries resulting from the use of Mirena™, including perforation of the uterus, ectopic pregnancy or idiopathic intracranial hypertension, and seek compensatory and punitive damages. Plaintiffs claim, inter alia, that Mirena™ is defective and that Bayer knew or should have known of the risks associated with it and failed to adequately warn its users. Additional lawsuits are anticipated. In 2017, most of the cases pending in U.S. federal courts in which plaintiffs allege idiopathic intracranial hypertension were consolidated in a multidistrict litigation (“MDL”) proceeding for common pre-trial management. As of January 28, 2019, lawsuits from approximately 700 users of Mirena™ alleging idiopathic intracranial hypertension had been served upon Bayer in the United States. Another MDL proceeding concerning perforation cases has been dismissed. The Second Circuit Court of Appeals affirmed the perforation MDL district court’s summary judgment order of 2016 dismissing approximately 1,230 cases pending before that court. In April 2018, a master settlement agreement regarding the global settlement of the perforation cases for a total amount of US$12.2 million was executed. Plaintiffs did not reach the 98% participation threshold as required under the settlement agreement, and therefore a US$200,000 reduction in the total settlement amount was negotiated. Upon completion of the settlement, the vast majority of filed cases nationwide have been (or will be) dismissed with 15 claimants affirmatively opting out of the settlement. Almost all the other non-participating claimants (approximately 200) have not filed cases and are presently unreachable by plaintiffs’ attorneys. As of January 28, 2019, a total of approximately 3,800 cases would be included in the settlement.

As of January 28, 2019, five Canadian lawsuits relating to Mirena™ seeking class action certification had been served upon Bayer. Bayer believes it has meritorious defenses and intends to defend itself vigorously.

Xarelto™: As of January 28, 2019, U.S. lawsuits from approximately 24,900 recipients of Xarelto™, an oral anticoagulant for the treatment and prevention of blood clots, had been served upon Bayer. Plaintiffs allege personal injuries from the use of Xarelto™, including cerebral, gastrointestinal or other bleeding and death, and seek compensatory and punitive damages. They claim, among other things, that Xarelto™ is defective and that Bayer knew or should have known of these risks associated with the use of Xarelto™ and failed to adequately warn its users. Additional lawsuits are anticipated. Cases pending in U.S. federal courts have been consolidated in an MDL for common pre-trial management. In 2017, the first three MDL trials resulted in complete defense verdicts. In January 2018, after the first trial to proceed in Pennsylvania state court had initially resulted in a judgment in favor of the plaintiff, the trial judge vacated the jury’s verdict and granted judgment in favor of Bayer. In April and August 2018, the second and third Pennsylvania state court trials also resulted in complete defense verdicts. Appeals are pending in all of the six cases. Additional Pennsylvania state court trials are currently scheduled for May and September 2019 and into the second quarter of 2020. Bayer anticipates that additional trials will be scheduled.

As of January 28, 2019, ten Canadian lawsuits relating to Xarelto™ seeking class action certification had been served upon Bayer. One of the proposed class actions has been certified. Bayer has filed a motion for leave to appeal. Bayer believes it has meritorious defenses and intends to defend itself vigorously.

Essure™: As of January 28, 2019, U.S. lawsuits from approximately 29,400 users of Essure™, a medical device offering permanent birth control with a nonsurgical procedure, had been served upon Bayer. The significant increase in filings was triggered by the statutes of limitations in some states. Plaintiffs allege personal injuries from the use of Essure™, including hysterectomy, perforation, pain, bleeding, weight gain, nickel sensitivity, depression and unwanted pregnancy, and seek compensatory and punitive damages. Additional lawsuits are anticipated.

As of January 28, 2019, two Canadian lawsuits relating to Essure™ seeking class action certification had been served upon Bayer. Bayer believes it has meritorious defenses and intends to defend itself vigorously.

Class actions over neonicotinoids in Canada: Proposed class actions against Bayer were filed in Quebec and Ontario (Canada) concerning crop protection products containing the active substances imidacloprid and clothianidin ( Neonicotinoids are a chemical class of systemic insecticides. ). Plaintiffs are honey producers, who have filed a proposed nationwide class action in Ontario and a Quebec-only class action in Quebec. Plaintiffs claim for damages and punitive damages and allege Bayer and another crop protection company were negligent in the design, development, marketing and sale of neonicotinoid pesticides. The proposed Ontario class action is in a very early procedural phase. In Quebec, a court certified a class proposed by plaintiffs in February 2018. Bayer believes it has meritorious defenses and intends to defend itself vigorously.

Roundup™ (Glyphosate): As of January 28, 2019, lawsuits from approximately 11,200 plaintiffs claiming to have been exposed to glyphosate-based products manufactured by Bayer’s subsidiary Monsanto had been served upon Monsanto in the United States. Glyphosate is the active ingredient contained in a number of Monsanto’s herbicides, including Roundup™-branded products. Plaintiffs allege personal injuries resulting from exposure to those products, including non-Hodgkin lymphoma (NHL) and multiple myeloma, and seek compensatory and punitive damages. Plaintiffs claim, inter alia, that the glyphosate-based herbicide products are defective and that Monsanto knew, or should have known, of the risks allegedly associated with such products and failed to adequately warn its users. Additional lawsuits are anticipated. The majority of plaintiffs have brought actions in state courts in Missouri and California. Cases pending in U.S. federal courts have been consolidated in an MDL in the Northern District of California for common pre-trial management.

In August 2018, a state court jury in San Francisco, California, awarded roughly US$39 million in compensatory and US$250 million in punitive damages to a plaintiff who claimed that a Monsanto product caused his NHL. While the punitive damages were subsequently reduced by the trial court to roughly US$39 million, we still disagree with the verdict and have filed an appeal with the California Court of Appeal. More than 800 scientific studies and regulatory authorities all over the world confirm that glyphosate is safe for use when used according to label instructions. This includes an independent study which followed more than 50,000 licensed pesticide applicators for more than 20 years which found no association between glyphosate-based herbicides and cancer, and the U.S. Environmental Protection Agency’s 2017 risk assessment which examined more than 100 studies and concluded that glyphosate is “not likely to be carcinogenic to humans.” We continue to believe, therefore, that we have meritorious defenses and we intend to defend ourselves vigorously in all of these lawsuits. The next two trials are currently scheduled for February and March 2019 before a federal court in San Francisco and a state court in California, respectively. Another five trials are currently scheduled in California and Missouri for the remainder of 2019. However, trial dates in all venues remain subject to change depending on court schedules and rulings.

As of January 28, 2019, one Canadian lawsuit relating to Roundup™ seeking class action certification had been served upon Bayer. Bayer believes it has meritorious defenses and intends to defend itself vigorously.

In connection with the above-mentioned product-related litigation, Bayer is insured against statutory product liability claims against Bayer to the extent customary in the respective industries and has, based on the information currently available, taken appropriate accounting measures for anticipated defense costs. However, the accounting measures relating to Essure™ claims exceed the available insurance coverage.

Patent disputes

Adempas™: In January 2018, Bayer filed patent infringement lawsuits in a U.S. federal court against Alembic Pharmaceuticals Limited, Alembic Global Holding SA, Alembic Pharmaceuticals, Inc. and INC Research, LLC (together “Alembic”), against MSN Laboratories Private Limited and MSN Pharmaceuticals Inc. (together “MSN”) and against Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries Ltd. (together “Teva”). In 2017, Bayer had received notices of an Abbreviated New Drug Application with a paragraph IV certification (“ANDA IV”) pursuant to which Alembic, MSN and Teva each seek approval of a generic version of Bayer’s pulmonary hypertension drug Adempas™ in the United States. In October 2018, the court decided, upon a joint request by Bayer and Teva, that Bayer’s patent is valid and infringed by Teva. This terminated the patent dispute with Teva.

Betaferon™ / Betaseron™: In 2010, Bayer filed a complaint against Biogen Idec MA Inc. in a U.S. federal court seeking a declaration by the court that a patent issued to Biogen in 2009 is invalid and not infringed by Bayer’s production and distribution of Betaseron™, Bayer’s drug product for the treatment of multiple sclerosis. Biogen is alleging patent infringement by Bayer through Bayer’s production and distribution of Betaseron™ and Extavia™ and has sued Bayer accordingly. Bayer manufactures Betaseron™ and distributes the product in the United States. Extavia™ is also a drug product for the treatment of multiple sclerosis; it is manufactured by Bayer, but distributed in the United States by Novartis Pharmaceuticals Corporation, another defendant in the lawsuit. In 2016, the U.S. federal court decided a disputed issue regarding the scope of the patent in Biogen’s favor. Bayer disagrees with the decision, which may be appealed at the conclusion of the proceedings in the U.S. federal court. In February 2018, a jury decided that Biogen’s patent is invalid at the end of a trial regarding Biogen’s claims against EMD Serono, Inc. (“Serono”) and Pfizer Inc. (“Pfizer”) for infringement of the same patent. In September 2018, the court overturned the jury decision and granted judgment in favor of Biogen. Serono and Pfizer appealed. The trial of Biogen’s claim against Bayer has not yet been scheduled.

Jivi™ (BAY94-9027): In August 2018, Nektar Therapeutics (“Nektar”), Baxalta Incorporated and Baxalta U.S., Inc. (together “Baxalta”) filed another complaint in a U.S. federal court against Bayer alleging that BAY94-9027, approved as Jivi™ in the United States for the treatment of hemophilia, infringes five patents by Nektar. The five patents are part of a patent family registered in the name of Nektar and further comprising a European patent application with the title “Branched polymers and their conjugates.” This patent family is different from the one at issue in the earlier patent disputes still pending in the United States and Germany. In October 2018, Bayer filed a lawsuit in the administrative court of Munich, Germany, claiming rights to the European patent application based on a past collaboration between Bayer and Nektar in the field of hemophilia. In 2017, Baxalta and Nektar had already filed a complaint in the same U.S. federal court against Bayer alleging that BAY94-9027 infringes seven other patents by Nektar. The seven patents are part of a patent family registered in the name of Nektar and further comprising European patent applications with the title “Polymer-factor VIII moiety conjugates” which are at issue in a lawsuit Bayer had filed against Nektar in 2013 in the district court of Munich, Germany. In this proceeding, Bayer claims rights to the European patent applications based on a past collaboration between Bayer and Nektar in the field of hemophilia. However, Bayer believes that the patent families do not include any valid patent claim relevant for Jivi™.

Stivarga™: In 2016, Bayer filed a patent infringement lawsuit in a U.S. federal court against Apotex, Inc. and Apotex Corp. (together “Apotex”). Bayer had received a notice of an ANDA IV application pursuant to which Apotex seeks approval of a generic version of Bayer’s cancer drug Stivarga™ in the United States.

Bayer believes it has meritorious defenses in the above ongoing patent disputes and intends to defend itself vigorously.

Further Legal Proceedings

Trasylol™ / Avelox™: A qui tam complaint relating to marketing practices for Trasylol™ (aprotinin) and Avelox™ (moxifloxacin) filed by a former Bayer employee is pending in the United States District Court in New Jersey. Bayer’s motion for summary judgment related to the relator’s Trasylol claims is pending. The U.S. government has declined to intervene at the present time.

Baycol™: A qui tam complaint (filed by the same relator as in Trasylol™ / Avelox™) asserting Bayer fraudulently induced a contract with the Department of Defense is pending in the United States District Court in Minnesota. In October 2018, the District Court judge issued a brief decision denying Bayer’s renewed motion to dismiss. The case will now proceed with discovery.

Newark Bay Environmental Matters: In the United States, Bayer is one of numerous parties involved in a series of claims brought by federal and state environmental protection agencies. The claims arise from operations by entities which historically were conducted near Newark Bay or surrounding bodies of water, or which allegedly discharged hazardous waste into these waterways or onto nearby land. Bayer and the other potentially responsible parties are being asked to remediate and contribute to the payment of past and future remediation or restoration costs and damages. In 2016, Bayer learned that two major potentially responsible parties had filed for protection under Chapter 11 of the U.S. Bankruptcy Code. While Bayer remains unable to determine the extent of its liability for these matters, this development is likely to adversely affect the share of costs potentially allocated to Bayer.

In the Lower Passaic River matter, a group of more than sixty companies including Bayer is investigating contaminated sediments in the riverbed under the supervision of the United States Environmental Protection Agency (EPA) and other governmental authorities. Future remediation will involve some form of dredging, the nature and scope of which are not yet defined, and potentially other tasks. The cost of the investigation and the remediation work may be substantial if the final remedy involves extensive dredging and disposal of impacted sediments. In July 2018, Occidental Chemical Company, one of the parties potentially liable for cleanup costs in the Lower Passaic River, filed a lawsuit in New Jersey federal court seeking contribution and cost recovery from dozens of other potentially responsible parties, including a Bayer subsidiary, for past and future cleanup costs. Bayer is currently unable to determine the extent of its liability in this matter. In the Newark Bay matter, an unaffiliated party is currently conducting an investigation of sediments in Newark Bay under EPA supervision. The investigation is in a preliminary stage. Bayer has contributed to certain investigation costs in the past and may incur costs for future investigation and remediation activities in Newark Bay.

Bayer has also been notified by governmental authorities acting as natural resource trustees that it may have liability for natural resource damages arising from the contamination of the Lower Passaic River, Newark Bay and surrounding water bodies. Bayer is currently unable to determine the extent of its liability.

Asbestos: In many cases, plaintiffs allege that Bayer and co-defendants employed third parties on their sites in past decades without providing them with sufficient warnings or protection against the known dangers of asbestos. Additionally, a Bayer affiliate in the United States is the legal successor to companies that sold asbestos products until 1976. Union Carbide has agreed to indemnify Bayer for this liability. Similarly, Bayer’s subsidiary Monsanto faces numerous claims based on exposure to asbestos at Monsanto premises without adequate warnings or protections and based on manufacture and sale of asbestos-containing products. Bayer believes it has meritorious defenses and intends to defend itself vigorously.

One A Day™ vitamins: Bayer has been named in a class action lawsuit in the United States alleging Bayer’s claims on its One A Day™ vitamins regarding the support of heart health, immunity and physical energy are false and misleading. The class is defined as California, Florida and New York residents who purchased One A Day™ products with the claims at issue. In September 2018, plaintiffs asserted through the filing of an expert report their alleged potential damages. Bayer’s challenge of the class certification is currently pending in the Court of Appeals for the Ninth Circuit. Bayer believes it has meritorious defenses and intends to defend itself vigorously.

PCB: Bayer’s subsidiary Monsanto has been named in lawsuits brought by various governmental entities in the United States claiming that Monsanto, Pharmacia and Solutia, collectively as a manufacturer of PCBs, should be responsible for a variety of damages due to PCBs in bodies of water, regardless of how PCBs came to be located there. Monsanto also faces numerous lawsuits claiming personal injury and / or property damage due to use of and exposure to PCB products. PCBs are man-made chemicals that were widely used for various purposes until the manufacture of PCBs was prohibited by the Environmental Protection Agency (EPA) in the United States in 1979. We believe that we have meritorious defenses and intend to defend ourselves vigorously.

Tax Proceedings

Stamp taxes in Greece: In 2014, 2016 and 2017, a Greek administrative court of first instance dismissed Bayer’s lawsuits against the assessment of stamp taxes and contingent penalties in a total amount of approximately €130 million on certain intra-Group loans to a Greek subsidiary. Bayer is convinced that the decisions are wrong and either has appealed the relevant decisions or plans to do so in due course. Bayer believes it has meritorious arguments to support its legal position and intends to defend itself vigorously.

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