Bayer’s CEO Fights to Fix a Problem of His Own Making

In April last year, Bayer AG Chief Executive Werner Baumann was on defense. The architect of one of the most disastrous acquisitions in German corporate history, he had become the country’s first chief executive to lose a vote of confidence by shareholders.
Almost a year later, with the German chemicals and pharmaceuticals company closer to settling more than 42,000 lawsuits inherited from its acquisition of U.S. agriculture giant Monsanto Co., and with a group-wide restructuring under way, investors say Mr. Baumann might just manage to fix the mess he made.
Bayer and plaintiff lawyers are approaching a deal in which Bayer would pay a total of roughly $10 billion for current and future plaintiffs who allege the company’s Roundup herbicide causes cancer, according to people familiar with the negotiations. Many analysts say a settlement in that range would be positive for Bayer.
Bayer declined to comment on the amount or time frame for a settlement. The company argues that Roundup is safe when used as instructed and has appealed the first three verdicts.
Expectations that the company could soon find a reasonable way out of its legal morass have helped pull Bayer’s shares up roughly 50% since they hit a seven-year low of roughly EUR52 last June.
But even Mr. Baumann’s supporters say his window for fixing Bayer might not stay open much longer. On April 28, the company holds its next regularly scheduled shareholder meeting and many investors expect Bayer to share at least a partial solution or progress on how to resolve the legal battle before then.
Absent any progress, Mr. Baumann could face another no-confidence vote, with another no being harder to survive, investors say.
Mr. Baumann’s $63 billion Monsanto acquisition in June 2018, which he had been working on since well before becoming CEO that same year, backfired after Bayer lost the first Roundup cases before California juries, raising alarm in the market about liabilities the company could face. Last spring, with Bayer’s market capitalization down more than a third since the first trial loss, investors rejected a vote of confidence in the executive board, a postwar first for a Dax-listed company.
Strong support from the company’s nonexecutive directors helped Mr. Baumann survive the vote. But investors also say he heard their message.
The company last June boosted oversight of its legal defense, including by creating a special board committee to monitor Roundup lawsuits and naming a lawyer with expertise in mass torts to advise the board. In October, it added an agriculture expert to its board. All those measures were demanded by investors, including activist investor Elliott Management Corp.
Another U-turn was Mr. Baumann’s agreement to engage in settlement talks with Roundup plaintiffs after he had previously insisted that Bayer was willing to fight a yearslong court battle.
Ingo Speich, head of sustainability and corporate governance at Bayer investor Deka Investment, said the CEO also addressed operational concerns by selling Bayer’s animal health unit and consumer-care brands on time and at good prices.
“Is he responsible for the legal issues? Yes. But he also showed that he can keep the business together,” said Mr. Speich, nine months after blaming Mr. Baumann for “infecting a healthy Bayer with the Monsanto virus.”
Within Bayer, employees say, Mr. Baumann has also worked to restore confidence and team spirit following what some describe as a meltdown in morale a year ago. Last spring, he held video town halls to reassure staff each time the company faced a new legal setback in the U.S., according to one midlevel executive.
“Last year people talked about the lawsuits all the time, now it’s mostly business as usual,” the person said. A lull in trials has helped, according to people familiar with the company: Bayer and plaintiff lawyers have agreed to postpone dozens of cases since they started settlement talks last fall.
Among the company’s many deeply anchored traditions is its ownership of Bundesliga soccer club Bayer 04 Leverkusen, whose home matches are must-attend occasions for top executives. At a recent soccer match with fellow senior managers, Mr. Baumann seemed optimistic about the future of the company and how it is growing, according to a person present at the meeting.
“There is a feeling there is light at the end of the tunnel,” the person said.
Mr. Baumann, the son of a baker, spent over 30 years working his way up from Bayer’s finance department to CEO. People who know him say he is cerebral, detail-oriented and rational. The CEO often brings a small notebook to meetings where he writes down questions he needs to follow up on, according to people who have worked with him. Others say he can summon minute details, such as the number of participants in a continuing clinical drugs trial, off the top of his head.
With the exception of Mr. Baumann’s predecessor, the Dutch-American Marijn Dekkers, Bayer CEOs have always been Bayer lifers. Many, like Mr.Baumann and current Chairman Werner Wenning, even hail from the Rhineland region, where Bayer is based.
Several of the group’s top leaders, Messrs. Baumann and Wenning included, lived through a similar crisis at Bayer in the early 2000s, when the company faced thousands of U.S. lawsuits over its cholesterol-lowering drug Baycol. Bayer had to pull the drug after it was linked to serious injuries and even death, and the company’s share price fell to an all-time low of EUR10.
During his time as CEO, Mr. Wenning improved Bayer’s position by spinning off assets, cutting jobs and eventually settling the claims for much less than investors had feared.
When Bayer set out to grow again, Mr. Baumann, described by many as Mr. Wenning’s protégé, proved himself a talented number cruncher during the integration of German pharmaceuticals company Schering AG, according to people present at the time.
The fact that Mr. Wenning did pull Bayer out of trouble made him something of a legend within the company. People familiar with Bayer said Mr. Baumann would need to deliver much more than a settlement to achieve a similar status.
Besides striking a settlement at the low end of expectations, investors say the CEO still needs to demonstrate how Monsanto will make Bayer thrive.
The lawsuits aside, Roundup is facing competition from a determined rival. Seed and pesticide maker Corteva Inc., is making moves to woo farmers away from Bayer products.
For Deka’s Mr. Speich, a full judgment on the Monsanto purchase — and thus on Mr. Baumann — will only be possible some two years from now, once the agriculture business is fully integrated.
Mr. Baumann has said repeatedly that buying Monsanto was the right move, saying it will position Bayer as leader in a market with enormous growth potential given the world’s fast-growing population.
Meanwhile, once the legal fight is resolved, some analysts say investors could push Bayer to consider the merits of splitting its pharmaceuticals and crop-science businesses. People familiar with Bayer’s thinking said the company would likely fight any push for a split, arguing that its existing plan to boost sales and profit through 2022 will create more value for shareholders.
“A settlement would of course be positive but I think it will grant Mr. Baumann only a short respite,” said Markus Mayer, analyst from Baader Bank.

https://www.marketscreener.com/BAYER-AG-436063/news/From-Toxic-to-Turnaround-Bayer-s-CEO-Fights-to-Fix-a-Problem-of-His-Own-Making-29969414/

Coronavirus Helps Drive China Consumer Prices to Highest in Over 8 Years

China’s consumer inflation rose to its highest level in more than eight years in January as hundreds of millions of Chinese struggled to cope with a deadly coronavirus outbreak that has raised anxiety levels and pushed up the prices of many household goods.
China’s consumer-price index climbed 5.4% in January from a year earlier, the highest reading since October 2011, the National Bureau of Statistics said Monday. The key inflation reading was higher than December’s 4.5% rise and topped economists’ expectations.
January’s pickup in inflation was driven by the Lunar New Year, which normally boosts demand for consumer goods, and by the coronavirus outbreak, said Dong Lijuan, an analyst with the statistics bureau, in a statement.
In Hubei province, which has been hit hardest by the outbreak, consumer inflation slightly outpaced the national average at 5.5% in January — a number that points to relatively steady price levels, Ms. Dong said.
Local residents, however, have been feeling more sticker shock from the outbreak than the official data from January suggest. Locals say panic buying began in Wuhan, the capital of Hubei and the epicenter of the outbreak, following authorities’ decision to lock down the city of 11 million people on Jan. 23.
The death toll from the outbreak began climbing in mid-January, and now surpasses that of severe acute respiratory syndrome, or SARS, nearly two decades ago, having killed more than 900 people, most of them in Hubei.
It’s unclear how fully the newly released data capture the economic effects of the epidemic, said Liu Xuezhi, an economist at China’s Bank of Communications, who said the coronavirus’s impact on demand for consumer products is likely greater than the January inflation data showed.
People are shopping less and eating out less for fear of contracting the virus, which should outweigh the impact from supply disruptions, said Mr. Liu, who expects consumer inflation to ease slightly in February, given softer demand and an expected recovery in supplies.
Like many in the epicenter, Wang Xuan, 36, a teacher at a Wuhan university, has since the lockdown began rarely stepped outside her apartment, which isn’t far from the wet market — believed by many as the source of the new virus.
“Things are definitely more expensive but we are just happy there is food to buy,” Ms. Wang said. She said her family members were initially living off food that they had prepared for the Lunar New Year holiday, at least until local officials began ensuring a supply of fresh groceries in February.
Other Wuhan residents, who fear contracting the virus at local supermarkets, have tried to buy supplies from smaller street vendors. Some said some fresh vegetables were going for as much as 140 yuan ($20) a kilogram, compared with roughly 20 yuan before the outbreak.
Across the country, food prices in January rose 20.6% from a year earlier, accelerating from a 17.4% increase in December.
Pork prices, which surged for most of the latter half of 2019 due to an outbreak of African swine fever, resumed their acceleration in January after easing somewhat in December. Pork prices surged 116% in January from a year earlier, versus a 97% increase in December. Pork prices alone boosted headline overall consumer inflation by 2.76 percentage points in January. Nonfood prices, such as services and other living costs, also accelerated in January.
Strong inflation, however, is unlikely to hinder Beijing’s efforts to spur economic growth after the coronavirus hit, economists say. Beijing has stepped up its support for the virus-hit economy, which is reeling from plummeting consumer spending during a traditional boom season and factory production that has been suspended for a prolonged period. Authorities have signaled that they are prioritizing growth over other policy goals, such as reining in debt and inflation.
Despite weaker demand that could curb inflation, a second case of avian flu in China, reported over the weekend in Sichuan province, is raising concerns over rising poultry prices. China’s agricultural ministry had reported another case in Hunan province earlier this month.
Amid the gloom, there was some good news on the inflation front. Monday’s data showed China’s industrial prices climbed out of deflationary territory in January, rising for the first time in seven months.
The producer-price index, a gauge of factory-gate prices, edged up 0.1% in January from a year earlier, compared with a 0.5% year-over-year decline in December. Economists had expected the index to stay flat in January from a year earlier.
That said, any further increase in industrial prices is likely to be curbed in coming months amid soft demand for industrial products, said Yang Weixiao, an economist at Founder Securities
https://www.marketscreener.com/news/Coronavirus-Helps-Drive-China-s-Consumer-Prices-to-Highest-Level-in-Over-Eight-Years–29969680/

Mereo BioPharma ADSs Up 28% on Equity Financing From Novartis

Mereo BioPharma Group Plc American depositary shares rose 28% to $2 premarket after the company said it has entered into a $5 million convertible equity financing with Novartis Pharma AG (NVS).
The biopharmaceutical company said it also entered into a securities purchase agreement to issue up to $28 million of its ordinary shares exchangeable for ADSs, including a $3 million initial purchase, with Aspire Capital Fund LLC, a Chicago-based institutional investor.
Mereo said proceeds from these transactions will likely be used for general corporate purposes, including clinical trial activity and working capital.

https://www.marketscreener.com/MEREO-BIOPHARMA-GROUP-PLC-56171672/news/Mereo-BioPharma-ADSs-Up-28-on-Equity-Financing-From-Novartis-29969906/

NMC Health gets preliminary offers, says co-chair’s stake under legal review

NMC Health said on Monday it has received two preliminary approaches from private equity firms and that the shareholdings of its co-chair and two other major investors were under a review for inaccurate disclosures.

The offers from U.S.-based KKR and GK Investment for the UAE-based healthcare group sent its shares up 11% in early deals and came weeks after it faced a short-selling attack from Muddy Waters.
NMC said no discussion have taken place on the terms of any potential offer. KKR did not immediately respond to a request for comment, while GK Investment could not be immediately reached.
Separately, NMC said co-chairman B. R. Shetty and his advisers are reviewing interests held by him and two other major shareholders – Khaleefa Al Muhairi and Saeed Al Qebaisi – for historical inaccuracy.
Shetty owns 19.22% stake as of May last year, while NMC vice-chair Muhairi and Qebaisi owned 15.82% and 7.66%, respectively, as of Jan. 28, according to Refinitiv data.
Both Muhairi and Qebaisi had sold some shares in NMC and payments firm Finablr early last month.
Meanwhile, the payments firm, which is also co-chaired by the Indian billionaire, said independent directors are reviewing alleged arrangements between Shetty and other shareholders, which could impact its shareholding structure.

https://www.marketscreener.com/news/NMC-Health-gets-preliminary-offers-says-co-chair-s-stake-under-legal-review–29968747/?countview=0

China rejects Foxconn’s request to resume production in key Shenzhen plant

Taiwan’s Foxconn was not allowed to resume production in its plant in the southern Chinese city of Shenzhen that had been shut due to the coronavirus outbreak, a person with direct knowledge of the matter told Reuters on Monday.

Authorities in the manufacturing hub of Shenzhen will check the plant again later this week to ensure virus control measures are properly in place, the person said, adding that employees there were told not to return to work on Tuesday.
Foxconn, formally Hon Hai Precision Industry Co Ltd, makes electronic devices for global vendors including Apple.

https://www.marketscreener.com/HON-HAI-PRECISION-INDUSTR-6492357/news/China-rejects-Foxconn-s-request-to-resume-production-in-key-Shenzhen-plant-29968718/?countview=0

Coronavirus cases climb again

The total number of confirmed coronavirus 2019-nCoV cases across the world is 40,561 and 910 deaths have been reported.

Japan’s Health Ministry says another 60 people on Carnival Corporation’s (NYSE:CCL) Diamond Princess ship have tested positive to bring the total number of people infected to 130.

Capital Economics estimates the coronavirus will cost the world economy $280B in Q1 and send global GDP in reverse (quarter over quarter) for the first time since 2009. Still, the longer-term view from analysts isn’t so gloomy. “We assume the virus will be contained soon, and that lost output is made up in subsequent quarters so that world GDP reaches the level it would have done had there been no outbreak by the middle of 2021,” notes Capital Economics.

The People’s Bank of China is busy taking action to prop up the economy, injecting 1.7T yuan of liquidity into the market and instructing banks not to call in loans for companies based in the virus-stricken Hubei province.

https://seekingalpha.com/news/3539912-coronavirus-cases-climb-again

Adverum up 23% premarket on new gene therapy data

Adverum Biotechnologies (NASDAQ:ADVM) is up 23% premarket on light volume in reaction to new preliminary data from a Phase 1 dose-ranging study, OPTIC, evaluating gene therapy ADVM-022 in patients with wet age-related macular degeneration (wet AMD). The results are being presented at the Angiogenesis, Exudation, and Degeneration Annual Meeting in Miami.

Data from cohort 2 (n=6) at week 24 following a single intravitreal injection of a three-fold lower dose of ADVM-022 showed that four of six patients remained rescue injection-free at a week 24 [100% (n=6/6) of patients in cohort 1 who received the higher dose were rescue injection-free at a median of 50 weeks].

In both cohorts, vision was generally maintained and retinal anatomy improvements were achieved and maintained.

The safety profile remained favorable with no treatment-related systemic adverse events and no dose-limiting toxicities.

https://seekingalpha.com/news/3539953-adverum-up-23-premarket-on-new-gene-therapy-data