07 July 2020 by jbchevrel
Bayer AG is in all Mains. Bayer segments are Pharmaceuticals (prescription products and specialty therapeutics), Consumer Health (non-prescription otc products in dermatology, dietary, analgesic, etc), Crop Science (crop protection solutions and seeds – incl. Monsanto) and Animal Health (veterinary products). After Leverkusen’s final defeat 2/4 vs Bayern Munich last Saturday, here is another setback for Bayer. Today Bayer AG 5y CDS widened +5 to 62.5. That marks a small under-performance locally as both Main s33 and its fair value are wider by just +1. Pre-COVID, Bayer 5y CDS was 45, peaked 130. So Bayer retraced 80% of COVID widening. Today Bayer under-performed after US District Judge Vince Chhabria expressed skepticism about Bayer’s proposed treatment of future claims. That comes after Bayer had announced a $11B settlement. Mr Chhabria described a plan to create a class action for future litigants as problematic in a court filing Monday and said he was “tentatively inclined” to reject it. He set a July 24 hearing date. Bayer has already agreed to resolve about 95k out of the 125k existing lawsuits. In parallel with CDS +5 widening, market value came down -5%. It had dropped -43% on COVID, reverted to -6% (2/17 start date, c2c) now -18%. The key question is surely about quantifying the future set of claimants (30k unresolved cases at the moment - this number has upside potential). Meanwhile, Bayer is set to report Q2 in a bit less than a month, on Aug 4.