Bayer Aktiengesellschaft (BAYN) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to Bayer's Investor and Media Conference Call on May 27, 2021. [Operator Instructions] I would now like to turn the conference over to Mr. Oliver Maier, Head of Investor Relations of Bayer AG. Please go ahead, sir.

Thank you so much, Emma. Good morning, everybody, and thank you for joining us this morning. Earlier today, we announced 5-point plan to effectively address potential future litigation in light of the denial of the motion to preliminary approve around our plan settlement agreement by Judge Chhabria of the U.S. District Court of the Northern District of California last night. It was very important for us to get in touch with you right away as probably you had a chance to see our reaction to it in our disclosure this morning. And on this call, we would like to first walk you through the details of our announcement and to provide important context for the actions and the risk mitigation they provide. And then we will open the line at the end to take some questions from your end. And I will now turn the call over to Werner Baumann, our Chief Executive Officer.

Yes. Thank you, Oliver. And also welcome from my side, also on behalf of Wolfgang Nickl and Liam Condon, who are listening on the call. First of all, let me say that we reconfirmed that we are fully committed to setting the Roundup litigation and to mitigating both the current and potential future risk that it presents for the company. And as you've seen our announcement yesterday, we were well prepared for all kinds of scenarios. As we've addressed many times over nearly a year now, we have made substantial progress in settling the vast majority of its current litigation with hundreds of law firms. And while we are still open to settling the remainder of existing claims on appropriate terms, we are, of course, going to reassess this going forward as well. The second piece of our settlement was the class plan designed to help manage and resolve potential future claims. Working and negotiating hard and long with Class Council, we made significant changes to address the concerns raised last year by Judge Chhabria. Based on his recent order, it is clear that the court will not approve the plan without significant additional changes. And these significant additional changes are not in anybody's interest, given the lack of a path forward on how to deal with future cases. All along, our goal when it comes to potential future litigation has been to mitigate the risk. We believe that the class plan submitted in the MDL was the fairest and, most importantly, most efficient way to do this, but it by no means the only way. So today, we want to talk about an alternative 5-point plan of legal and commercial actions that will take and that we believe can achieve a level of risk mitigation from future litigation that is comparable to what we hoped to achieve with a national class plan in the MDL. First, we will create and promote a new website with scientific studies relevant to Roundup's safety and take steps to request an EPA approved corresponding language on Roundup labels. Whether the EPA ultimately approves the label addition, we will be creating and maintaining this website in keeping with our commitment to transparency. The purpose of this website is to provide purchasers with access to the significant body of science on the safety of glyphosate so that they are empowered to make informed decisions on the products they use. We will also promote this website to all purchasers so that they are aware of this resource. Second, we remain committed to the Roundup brand in the U.S. residential lawn and garden market. And will immediately engage with our partners to discuss the appropriate future path, including the future of glyphosate-based products for this market or the opportunities for alternative active ingredients that will continue to meet the needs of consumers, which has been trusted by consumers for decades. None of these discussions will affect the availability of glyphosate-based products in markets for professionals and agricultural use. Indeed, we know that farmers continues to rely on Roundup containing glyphosate to deliver crops to market and practice sustainable farming by reducing soil tillage, solid erosion and carbon emissions. Regulators around the world continue to conclude that glyphosate-based Roundup products can be used safely and are not carcinogenic, and we are just as confident in their safety. Just last week, the U.S. Environmental Protection Agency filed a brief with the U.S. Court of Appeals for the 9th Circuit in which it affirmed once again that glyphosate "poses no human health risk of concern." Third, we are exploring alternative solutions to manage potential future claims. We'll provide further details on what this could entail as those become available. One element of these solutions will be the creation of an independent and potentially court-sanctioned scientific advisory panel that would evaluate the safety of glyphosate-based Roundup products with a focus on the issues that have been central in this litigation. Importantly, the panel would be comprised of independent science experts. The findings of this advisory panel would be released publicly and on BEA's Roundup reference stage, which I referenced just a moment ago. This approach reinforces our commitment to transparency, as well our steadfast belief in scientific rigor and our confidence in the safety of glyphosate. As a fourth point, we will reassess ongoing efforts to settle existing claims. We will continue to be open to settlement discussions for existing claims provided that claimants meet the qualifications. This effort to resolve claims amicably is a step by the company in good faith to bring an end to the litigation and liability risk. But we will regularly assess whether this approach continues to serve the company's better interests. We've been executing on this effort since announcing the comprehensive Roundup litigation resolution in June last year and most recently reported that the vast majority of these, approximately 96,000 claims, have been finalized -- are in the final stages of resolution or involve claims that are not eligible. And finally, the appeals of the Hardeman and Pilliod cases will continue through the legal process and can also help manage future liability risk. We also now have an additional case on appeal, Carson, that raises the same fundamental preemption issue with a state law of warning claims conflicts with U.S. Federal law. We are confident in the strength of our legal arguments and the favorable decision by the U.S. Supreme Court by mid-2022 on cross-cutting issues like federal preemption or expert evidence would significantly reduce future liability risk. Before we open the line to questions, I want to say a few words about the financial impact of our announcement today. First, because there were front-loaded costs in the class plan that we will not incur now, we expect that these developments actually improve cash flow in the short-term this year and also next year. Last, at this point in time, we are not making any changes in the $2 billion provision we took in connection with the class plan. The long-term liability risk from this litigation will depend on a number of factors, including the outcome at the U.S. Supreme Court. And we will continue to assess this risk as we move forward. Now let me open the line to your questions. Joining me for the Q&A are Wolfgang Nickl, our Chief Financial Officer; also Bill Dodero, our Global Head of Litigation; and as already mentioned, Liam Condon, President of our Crop Science Division. And with that, we will now open the line for your questions, and I'll turn it back to Oliver.

Thank you Werner. Much appreciated. Thanks for the update. And I think we can now open up the lines for questions from the audience.

[Operator Instructions] The first question comes from the line of Richard Vosser with JPMorgan.

Two, please. Firstly, on the removed -- potential removal of glyphosate. Maybe you could give us an idea of those consumer containing Roundup products, how much of sales is that? And what the implications of that would be on the -- on your sales? And second question, just on the people who've used glyphosate in the past haven't -- and potentially developed NHL in the future. Would those be covered by some sort of trust or funds that would, i.e., the $2 billion provision you've got to cover those claims? How would that framework take place?

All right. Thanks, Richard. First question on glyphosate sales, it's going to be taken by Liam, and I'll address your second question.

Yes. Thanks, Richard, for the question. So sales of glyphosate, the lawn and garden segment are around about EUR 300 million. I think it's very important to point out here that we, as payer, remain completely committed to the lawn and garden market and we remain completely committed to the Roundup brand. So what we're discussing with our partners is alternative path forwards, for example, potential alternative active ingredients. And we believe if that we can manage this in a very professional manner, so we don't expect any material financial impact from any kind of change here.

Thank you, Liam. So on your second question, Richard, let me -- let me frame it with just looking at what we accomplished over the last year. We have been quite successful in settling about a 96,000 cases, so the vast majority of the inventory, which proves that the mechanisms that we have in place with the work with the mediator, our interaction with plaintiff council proves to work within also the frame of financial responsibility. Now the future cases are nothing but future inventory as those will kind of build up going forward as people disease and then eventually bring claims against the company. And as I mentioned earlier, we are very prepared and we have used the time, I think, very, very well in kind of exploring all options at hand and what would make more sense, not only for the companies but also for plaintiffs. So what we have done is we have run a pilot already, yes, as part of the MDL proceedings with Ken Feinberg along a further compensation grid that is just about the same in terms of how it's going to work as the settlements we have put in place. And we are going to pursue that path forward. There may be alternative other and additional modalities that we might look forward. But first and foremost, you should think about the future claims being addressed here just about the same way as we've done in the past with now the mechanism that we put a claims administration program in place. I think that's the best way to frame it.

The next question comes from the line of Michael Leuchten with UBS.

Three quick ones, if I could. Just one aim of your initial strategy was to get to a degree of finality. And I was wondering these alternatives that you're talking about. Does that still get you to that? Or is this now a process that ends up being more drawn out, and then unfortunately, we have to accept the finality is taking a backseat for some time? The second question is, do you have any visibility on trajectory of pace of the inventory as it builds as you just alluded to Werner? Do you see many more cases being filed after the settlement, the 125,000 cases last year? And as a result of that, you can take a view that if you can slow this trajectory down, the sort of NPV of future exposure is acceptable and hence, your decision to go down that alternative path? And then third quick one for Liam. I don't know whether you can, but is there any way of assessing the collateral damage it might cause if you do change housing garden products of Roundup? I assume there isn't any redeposit into the commercial use. But I just wondered if you assess the risk that this might have some spillover effect?

Yes. Michael, thanks for the question. Let me give you the first shot on your first 2 questions. Bill Dodero, our Head of Global Litigation, will then chime in. And then Liam will address your question on potential collateral damage on the household residential business. So as I mentioned in my introductory remarks, we have an alternative course of action. And just to put it very plain, we are in charge and in control now. And having said that, we continue to pursue comparable solution, yes? There are different ways to skin a cat, quite frankly. And there are different mechanisms that will ultimately be designed to achieve the same goal, yes? So we continue to have the goal to getting to the maximum level of finality with the measures and the process that we are putting in place. In terms of visibility, as you would expect, the number of new cases that come in has reduced significantly or dramatically or massively, however you want to call it, in terms of the incremental cases that are being filed. And that's also understandable. As we've been -- you're negotiating with class council on the inventory grid, I think regulatory reported on the cases that are filed, so you also see it in the quarterlies, that gives you a good perspective on the dynamics. And with that, let me hand it over to Bill before it goes to Liam.

Yes. Michael, I think what I would add is that your first question of does this strategy aim for and achieve comparable finality? And I would just add as well that the pace of any incremental future inventory as well is shaped and impacted dramatically by a few things. First, you heard about the continued assessment by regulators and scientific bodies, adding to the 40-year history of a favorable assessment that the product is not carcinogenic or poses human health risk. That's been updated and shared by EPA as recent as last week, that would have an impact on any potential future incremental inventory build. Secondly, there's additional tools that are part of this plan. And concluding, by way of example, the pursuit of the Supreme Court impact on any potential future cases, which would be dramatic and I think we've said that a few times. Secondly, the continued settlement efforts, whether with court-appointed mediators, assistance from future courts and our own direct efforts also impacting any potential incremental build. The continued science panel that we talked about in paneling and a future potential court-sanctioned elsewhere panel that would help to bring science into the discussion and validate in the courtroom, what I mentioned is the long-standing 40-year history of assessment by regulators, which is only missing in the courtrooms, but a very present everywhere else in the world. And those factors will greatly be at our disposal to achieve that comparable level of finality and also dramatically affect the pace of any potential future inventory incremental build.

Okay. Thanks, Michael, for the other question on collateral damage. So I'll just re-emphasize again, it's very important that understood that Roundup will remain a strong and trusted brand in the lawn and garden segment. So what we're discussing is potential alternative active ingredients. We're only discussing this purely to mitigate potential litigation risks because around 90% of potential -- of claims so far have come from this segment. So there is no safety concern whatsoever related to this. This is purely a risk-mitigation measure for us. Demand has remained robust throughout litigation. I think this is very important to note. And we have no plans whatsoever from a professional and from an agricultural market point of view to change the availability of glyphosate. And it's very important that glyphosate will remain available for professional and for agricultural use. So in those segments, we did not foresee any collateral damage because again, demand is completely unrelated to litigation here.

The next question comes from the line of James Quigley with Morgan Stanley.

A couple left from me. So in terms of the agricultural market, obviously, Judge Chhabria was keen to add some kind of warning label or at least some kind of factual information around the IARC study. I mean is that on the table? Or is that a complete sort of red line for you guys? In terms of the additional 30,000-or-so holdouts, i mean, do you have visibility over that inventory now? Is it sort of a similar sort of build in terms of 90% or so home and garden use? And for the settlements that have been made so far, what has been the average payout for those estimates?

So let me kind of repeat so we make sure that we get your questions. First question was on IARC and the label. So that one is Bill that would answer it. Secondly, you had asked for the holdouts, yes? And also in terms of whether we have visibility to the holdouts and the average payments, yes? And that one, I can briefly address. So Bill, if -- you want to go first?

Certainly. So first, the proposed label addition, which is a very strong demonstration of our commitment to the transparency as well as the strength of the science would be a reference link that we would seek from EPA permission to place on the label and then behind it a website giving transparency and visibility to all information on the topic, which, of course, would include the robust body of information the EPA has continued to assess and validate the safety of the product from a human health perspective and also the IARC opinion.

All right. Thanks, Bill. On the holdouts, yes, we do have visibility on the holdouts because we are -- I wouldn't say daily, but almost daily in contact with all of them in order to negotiate the settlements that are referenced in my introductory remarks. In terms of your average payments, that's actually a very difficult question to answer well, quite frankly. Because the quality of the inventories differs vastly, really vastly. And hence, each of the holdouts has to be assessed in terms of the quality of the inventory and the validity of the claims that are being made. So I think the best way to answer your question is that the holdouts that we are negotiating with and the $9.6 billion -- or $8.8 billion to $9.6 billion that we put aside for the inventory settlement continues to be fully in line with the programs that we are negotiating also along the grids that we established in terms of the quality of the different claims here. So we continue to pursue a very, very rigorous and disciplined and also, I have to say, very fair approach, yes, when it comes to the quality and the validity of the claims that are in brought.

Next question comes from the line of Sachin Jain with Bank of America.

Sachin Jain here from Bank of America. Just 3 quick follow-ons, if I may. Firstly, what -- could you give some color on the Supreme Court's importance to your overall plan? How much of a binary event should we view that? I think Werner you mentioned, if it goes against, you would reassess at that point in time. So just any color there. Secondly, you've very clearly mentioned the risk-mitigation plan provides an affirmed comparable to the class plan. I understand it might not be possible at this stage, but when would you be comfortable putting an upper end to the sum that you think is possible for finality versus the $2 billion set aside today? And then the last question, obviously, you're pursuing a different plan announced today. Given the failure of the MDL through Chhabria. Just what are the disadvantages you see in this plan that means it wasn't pursued in the first instance almost 3 years ago?

All right. Thanks, Sachin, for your 3 questions. The first question on Supreme Court is going to be addressed by Bill. Second question on risk mitigation and financials is going to be addressed by Wolfgang. And I'm going to take the third one on MDL and the perspective of 3 years ago and where we are now.

Yes. So on the Supreme Court. Certainly, it's an important part of the plan and element of it, and it would have a very pervasive and cross-cutting impact. And let me back up a step, certainly, when you look at the fact that a manufacturer has followed the science and all applicable regulations, but has nevertheless been held liable to the tune of millions of dollars, it's a very obvious step that we would ask the Supreme Court to review the 9th Circuit's flawed ruling in Hardeman. I mentioned in my answer a moment ago, other aspects of the plan, including our continued advancement of the science and it continues to only develop in favor of the company's assessment of safety and, in fact, the worldwide assessment of the safety. So just on all of those elements, certainly, the Supreme Court is an obvious and important step along with the others I've articulated. And that's why we will continue in our petition for review, seeking that from the Supreme Court later this summer.

Yes. This is Wolfgang. As you mentioned, comparable solution. At this point, we have not seen a need to make any change to the $2 billion for the future and to the -- about $9.6 billion for the current as a matter of fact we made. The long-term liability, obviously, depends on a whole number of factors, including what the Supreme Court is going to do that you also mentioned Bill just. And so you can assume that we will just continue to monitor this and do a quarterly assessment on the potential liability. What I want to also highlight that Werner said in the script, I think, is also important for investors and others, the cash layout -- outlays in 2021, for sure, but likely also in 2022 will be somewhat lower than what initially said. And that has to do with the fact that the future class was somewhat front-end loaded. I think that's an important detail as well. So we are completely committed to get this resolved. It's comparable in many facets, and we'll keep you updated as we go through the quarters.

All right. Thanks, Bill and Wolfgang. So Sachin, on your third question, our objective all along has been to find a solution that is both financially responsible and that also provides a sufficient or maximum finality to the extent that we can get to it. And in that spirit, we are very early on engaged in the MDL litigation under Judge Chhabria, and we also agreed very early to the mediation with Ken Feinberg. So if I now look back over the last, let's say, 2.5, 3 years, my perspective is the following. The things that we could do that the mediator in settling the inventory has been proceeding very, very well with the vast majority of the 96,000 cases that I mentioned, that's already been settled. And of course, you're being in constant interaction and dialogue with a holdouts as long we maintain a certain frame that I mentioned as well. We have also worked really very, very hard. Our legal team has worked very, very hard and actually negotiated very, very hard and long with plaintiffs' counsel who represents the future class to come up the solution that would be fair and equitable and provide a path towards finality for the people who are going to -- for victim of NHL over the next years to come. Very much to our surprise, I have to say, in late June, the support of Judge Chhabria was not obtained. He raised 4 critical points. Then yet again, all of which we took up and negotiated a new and significantly changed agreements that was a draft agreement with plaintiff account, yes? So this is not something that we designed and submitted, but it was negotiated with ones who have the keen interest to defend the interest of future plaintiffs, yes? And that was submitted. And it was designed to provide an efficient, fair and I think very attractive access to funding for future NHL claims. Now the issue with the last ruling of Judge Chhabria is beyond many other things, there's actually no path at all that would address the future class. And with that, we are coming to an end in that path. And as I mentioned earlier, rest assured that we didn't leave any stone unturned, yes, in creating the option space that would then cater to all kinds of outcomes. And that is why we could react very, very quickly after the news broke last night and then also be in touch with you to tell you what it is that we are now going to do achieve the comparable outcomes, yes? So that's essentially where we are, yes? So the other one would have been more efficient. No doubt about it. We were willing to pay a significant premium for that efficiency. That is no longer in the cards now. Now we go back. Wolfgang already mentioned that the payout scheme is going to be very different. And we are not committing a $2 billion upfront in exchange for getting that efficient solution. That's what I said. It's comparable. Now what we are going to do is what we present to you today. It has some positives and negatives, a little more complicated, but it also has some advantages. And clearly, we are now in charge and control as to how we design that comparable outcome that's a little bit predictable at the same time. I hope that addresses your questions, Sachin.

The next question comes from the line of Jo Walton with Crédit Suisse.

Just a couple. It looked in Judge Chhabria's comments that he invited you to refile and try again. Have you decided -- you're presumably not going that route? And are there any implications for any of the other settlement on the basis that it was going to be a whole settlement, not just for the future side? So just any implications of not involved in Judge Chhabria in the future? Secondly, any idea of the timing that you could get for an EPA decision on a change in the label. And I would assume that getting the EPA support for this was something that you've been trying to do for some time. So do you have any time frame? The EPA has been supporting your decision at your viewpoint for a long time, but still, there has been no formal change in the label, so some timing there? And then the timing on the Supreme Court. Are you confident that you will get a decision in mid-2022? Or could this be something -- do you have a good timetable towards that decision? Or could we see this still slipping further because it's obviously important? And finally, are there any other reviews that we should just think about, maybe European reviews or any other agency reviews on the safety of glyphosate, which could come out and very strangely derail you again by having some scientific body apparently put some restrictions on the product?

So thanks, Jo, for your question. Let me take the first one. And then the second one is going to be taken by Liam. The third one on the Supreme Court is going to be answered by Bill. And then I will come back on, let's say, regulatory views and what you would have expected -- to be expected. So the first question is an interesting one, yes? And we, of course, also, you're right, Judge Chhabria order, I have it in front of myself here. And some of you, in your early comments, also addressed that the court order was not necessarily to be expected that early based on the deliberations of Judge Chhabria last week, yes? So -- and of course, during the discussions last week, he said, "Well, you might want to consider to refile and demand." He also said that you would entertain hearing as always on the record. And that is the brief that we took home. And then, again, yes, to our surprise, the ruling came out. With that, to be very clear, we would, of course, have looked at further discussing with Judge Chhabria as he had suggested. There were a few good points he made. And others, we are -- we clearly had our reservations with some red lines that we do have in order to make it meaningful for everybody. But I just want to come back to what I said earlier. The biggest issue is that the proposal on the table did not serve any purpose for the future class anymore because he ruled out essentially that there was a path forward for the future. And that brings it back to us saying, "Hey, what would be the basis now to refile also after his ruling yesterday if we can't address the people, yes, that would be looking at bringing their claims against us with a, let's say, a federal solution, yes? So I think we said it multiple times now. This is now under our control on how we are going to deal it because there is no path forward on the federal side. And that is essentially what Judge Chhabria ruling says. So now let me give it to Liam before Bill comes to your Supreme Court question and the timing.

Thanks, Jo, for the question on EPA timing related to any potential change of wording on the label. We're engaging immediately with the EPA. But, of course, we cannot predict how long that process will take that. That will be completely up to the EPA. As I say, we'll be doing this immediately. But we don't want to second guess what the EPA says or how long they take. So we will update you immediately as soon as we have any new information on that.

So I'm just checking, you haven't asked them to do that before, then this is your -- this is -- I was under the impression you would have asked them do this already. So you're telling us that this is your first request to make a change to the label.

Yes. We haven't put any formal request in to change the label, and this is a process that we now need to immediately engage in.

Bill?

Yes. Supreme Court. Let me address your concerns -- so your question. So just to set the stage here. What we will be doing is asking the U.S. Supreme Court to review the 9th Circuit's flawed ruling, in our view, Hardeman versus Monsanto. I mentioned earlier, the very simple argument is it simply can't be right that a manufacturer that follow the science and all applicable regulations is being held liable. In particular, we will point out that the 9th Circuit, in our view, erred in holding that Hardeman's state law claims are not preempted by federal law, given the fact that EPA has routinely approved the use of glyphosate and Roundup and has forbidden placing a cancer warning on glyphosate-based products. What we'll do is file that petition for review with the Supreme Court later this summer. The Supreme Court will likely decide whether to grant review by fall or early winter. And if the Supreme Court grants review on that time line, a decision would be issued by roughly mid-of 2022.

Very good. Thanks, Bill and Liam. So let me come to your fourth question then, Jo. One of the things that is going on and interesting enough completely silent is the review at European level, that is going on, that we would expect a decision next year in 2022, for the reregistration of glyphosate in Europe. And on that one, it is a totally transparent process with full participation of everybody who wants to participate. Of course, we cannot preempt what the outcome is going to be. But I can only repeat that we are totally confident based on the science and the regulatory trajectory of that product so far and to the best of our knowledge, no new scientific news that would alter the risk-benefit assessment and also the assessment of noncarcinogenicity of the product. And as Bill referenced already. We have had a strong amicus brief from the EPA and also that -- with that filing in front of the 11th Circuit reconfirming strongly by the EPA the safety and noncarcinogenicity of the product, yes? So based on that, we are not aware of any kind of, let's say, your alert that we should give you because of your evolving your kind of your evidence or what have you or regulatory action on glyphosate at this point in time.

The next question comes from the line of Jonas Jansen with FAZ.

I have 2 questions. One is do you need to make a product recall with the existing rollout product for consumers? Are you just selling them in the parts right now? And the second one is, I don't fully understand point 4 on how you speak with the plaintiffs that are not in part of the agreement. If they plan to go to courts in, I don't know, 2, 3, 4 years, you will have to see them there. Am I right?

Okay. Thanks, Jonas, for your first question. So on the product and our partnership with our partners, so Liam will take the question. And I'll answer your second one.

Yes. Thanks, Jonas, for the question. So very clearly, there will be no product recall what we're discussing with our partners, with our distribution partners at the future of the active ingredient glyphosate. But that's all, and we will continue to ensure that the brand Roundup remains available and whatever transition might happen, this would all be done in a very professional manner, which would not disrupt supply to the market.

All right. Thanks, Liam. So on the future plaintiffs, our objective is to find a good and efficient process for future claimants to deal with the claims. And of course, we had put together an approach that are outlined earlier during this call. And this is now going forward a question on how to best make sure that we are in contact with these claimants going forward, yes? But this is something that is going to go and evolve. What I can say is that pilot that has been run under the auspices of Ken Feinberg as part of the MDL proceedings, has been very, very successful, yes? So and again -- and we have the 96,000 "track record," which means that we have effective ways to engage, yes, and then come to agreements both with the inventory and I would also say prospectively the future claimants.

The next question comes from the line of Keyur Parekh with Goldman Sachs.

Two, if I mean, please. One, on the independent scientific advisory panel I'm wondering if you're able to tell us how this might be different to the one that you had originally proposed in the returns of the future settlement? If it is not different, should you also assume this will be 4 years, et cetera? Just to be keen to understand why -- how this pattern might be different. And then secondly, and Liam, I might be over interpreting things here, but you used the word professional in describing the way you're going change -- potentially change or address the Roundup for noncommercial use. So I'm wondering if there's a subtle point you're trying to make in choosing that word professional. And just linked kind of as you think about potentially newer ways of making Roundup and I think you use a word new formulations or new kind of ingredients. Why wouldn't you do that for the entire kind of Roundup product and only propose it for kind of noncommercial use?

Thanks for your question. So as you suggested, Liam will take your -- the second question and that addendum. I'll address your first question. So let me start with 4 years because that's going to be important in that context. We are now in a different game, if you want so. We are not bound to nor will we pursue structure that was proposed as a part of the future settlement in front of Judge Chhabria, yes? So there is no 4-year duration of a program. We will now start our own settlement program. The other things that were in there, like medical monitoring and like, forget about that one. We are now in a different setting that will ultimately yield comparable results that's not going to be different in the way that is going to be in exit, which also means that the science panel, yes. And the different iterations that have been taken around the science center, you can also kind of your shelf in a way, we are now looking at something that continues to be a core element of the science panel, and that is -- it truly has to be independent, yes, because otherwise people would say, "Well, that is a Bayer panel." This is an independent science panel that we also try to get court endorsed, yes? There's different thinking about how to get an exit. So that is truly also acknowledged as independent. But that is the objective of the exercise. So with that, I hand it over to you, Liam.

Yes. Thanks Keyur for the question. So I can assure you that there's no hidden message here when we refer to professional. Let me just make a distinction, when we talk about the lawn and garden, segment, this is the residential segment. This the consumer use, and this is where we're talking about them looking at -- with our partners, potentially alternative active ingredients. Then we have the main use is the agricultural use, so farming, and glyphosate is a completely system relevant product of our farmers. They couldn't do farming in the U.S. without glyphosate. So this is really crucial that this remains you know. And then we have the professional use, which is where there's a variety of different nonconsumer-related users, for example, forestry management, for example, rail track management. Trains couldn't run if [indiscernible] cropping up, and this is a professional type of application. So these uses will continue because they need to continue also for the safety of the general population. And, let's say, as Werner mentioned in his speech also for environmental reasons. If you think about how farming is done today and the ability to ensure no tillage, that farming can be done that we don't release more CO2 into the atmosphere. So very clearly, a professional ag uses of glyphosate will continue. You asked as well why we would only consider them potentially alternative active ingredients for lawn and garden versus these professional and agricultural uses. And this is very simply related to, again, the litigation risk that we want to manage where over 90% of the claimants to date have come from this lawn and garden segment. And that, coupled with the fact that there are no real alternatives in the professional and agricultural space, and we have a clear obligation here.

Let me briefly get the word at Bill, yes, so you can further elaborate on the science panel. There's a few additional aspects here that Bill will address from his perspective, yes, that's also important for you to know.

Yes. Very, very happy to. I think one thing just at the foundation of the science panel. So you can hear it as well. I've mentioned that we've all been discussing at great length the inconsistency between what's happening in the court room and what's happening in the scientific and regulatory actual world consideration. I think one important tenet of the science panel that you keep hearing from us routinely is not limited evidence that only an advocate expert witness retained for purposes of showing up in the court room who doesn't look at the full body of science accumulated over many thousands of scientists over decades, over the world's consideration of this is obviously not taking into account effectively in a courtroom. So whether it takes 4 years or not, the important point here is that the science panel does this fulsome consideration. And if that fulsome consideration comprised and done by independent experts who are there and charged with nothing about assessing all of the evidence, which again, continues to develop very favorably every time it's been looked at and reexamined in the past 5 or 6 years, over and over and over again, allows and elucidate to what's going on in terms of that difference between the courtroom and the regulatory and scientific world. It helps reinforce our commitment to transparency. It demonstrates our belief in the scientific rigor and safety of the product. And to the extent that can be judicially sanctioned or also brought into the judicial elements remaining of any potential future matters, it's also an impacting factor in our plan. And so I just wanted to give that further context and answer to your questions.

It's Oliver. I'm conscious of time, and I think we have time for one more question, if that's okay.

Great. So the final question comes from the line of Sebastian Bray with Berenberg.

I had 3, please. The first is on the $10 billion slightly left provisioned for the settlement of case inventory. Can I just be clear on this, to what extent does this include an amount that you think you will have to pay to holdouts? Or is there potential for the holdouts to add to this number? Could you remind us of how many there are at the current state of affairs? Maybe I didn't catch this earlier. My second question is on the desire to relabel for product. What is the point in potentially withdrawing glyphosate from the retail markets, at the same time, potentially asking the EPA to approve relabeling? And given that the argument on preemption is essentially Bayer couldn't be expected to comply with state failures toward legislation and [indiscernible] at the same time, what implications does it have for the preemption argument if Bayer turns around and successfully asked the EPA to relabel? The third question is on the pharma versus retail consumer dilemma. Will relabeling that Bayer is requesting the to do apply only to the retail market or both to retail and to farmers. Thank you.

Yes. Thanks for your questions. On the provisions, Wolfgang will take that question and shed some further light on holdouts and what include and what not. Then on glyphosate retail, I think a lot has been said already in terms of us having to discuss with our partners. So there's limited additional color that we can give. This is what Liam is going to take so on your last question, yes, when it comes to the label. Is it going to be restricted to retail or beyond? And then on preemption, that would be answered by Bill.

Okay, Sebastian, thanks for your question. Very quickly on the whole glyphosate complex. We had 2 provisions, about $9.6 billion for the current and about $2 billion for the future. The $9.6 billion for the current did include what we committed for the 96,000 that have been resolved, and it obviously has a remaining amount that we think is efficient of what you call the holdout. So that's totally clear. And on the $2 billion, I commented earlier, but there's no change right now, but we'll keep on assessing this. Just one technical thing that is the provision that we had at one point in time, provided, of course, against the current. We have already made a payouts. And last year, I believe it was $3.8 billion. And in Q1, $2.2 billion. So if you would look at the balance sheet, you wouldn't see the full amount anymore because there was some payout. I hope that answers your question. And over to Liam, I guess.

Thanks Sebastian. So if I got it right, the retail withdrawal, as you mentioned, is purely litigation risk related measure, nothing whatsoever to the safety profile of the product. And as we said, the product will remain available in professional and agricultural use. Related to the warning label are any changes in wording on the label, what we would be discussing with EPA is for all glyphosate related products, regardless of how we categorize those products within our, let's say, internal classification system, whether it's consumer or professional or agricultural use.

All right. Thanks, Liam. And with that, over to Bill.

Yes. And I'll just jump in on the preemption aspect of that question. So first, let's start from the premise bit. What we're seeking to do is establish the website with the scientific studies and information relevant to Roundup's safety. And what would be requesting of the EPA is to approve a corresponding reference language or link on the Roundup labels to that information. That's what we'd be seeking. We know EPA's continued view on this topic, both because of the consistent approval without any such warning as you called it. And specifically, you might recall back in August of 2019, we know the EPA's view, they have indicated in a letter to all manufacturers that it would be false and misleading to put a "warning" on the product. And so just to be clear, from a preemption standpoint, we aren't in any way diminishing or second guessing our arguments on what the tort system has imposed, a duty to warn. And instead, what we're seeking is a link to that scientific body of information if the EPA allows also a reference link to that website, which we've established regardless.

All right, Sebastian. Thanks, Bill and Liam. With that, I'll turn it back to Oliver.

Yes. Great. Thank you, Werner. Thank you Wolfgang, and thank you, Bill, for the details provided and to shed some more light. I appreciate that everybody was able to dial in this morning. Thanks for taking the time. I hope that was helpful us getting back to you as soon as possible. And we talk soon. Thanks so much. Take care, everybody.

Ladies and gentlemen, this concludes the Investor and Media Conference Call of Bayer AG. Thank you for participating. You may now disconnect.