Bayer Aktiengesellschaft (BAYN) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to Bayer's Investor Conference Call on July 29, 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.

Thank you very much, Emma. Good afternoon, and thanks for joining us today. I would like to welcome all of you to today's Glyphosate Litigation Update Call. We really appreciate everyone participating today as we are absolutely aware that today is a very busy reporting day. With me on the call today is Werner Baumann, our CEO; and he will be joined in the Q&A session by Wolfgang Nickl, our CFO; Bill Dodero, our Head of Litigation; and Liam Condon, CEO for the Crop Science division. If we have some time at the end today, we might also be able to cover just a bit the PCB as there were some -- was a reverse jury verdict 2 days ago, which I think would be of interest for some of you to get a statement on this one, too, but let's focus on glyphosate first. Let's go to Slide 2. After our call at the end of May this year, we were -- we presented and outlined our 5-point plan. We today want to inform you about the progress we are making and our estimation financial implications of the potential outcomes. The intention of today's call is to give investors additional insights that will allow them to better evaluate the potential financial impact and ultimately allow to define and potentially compartmentalize the 2 key scenarios one could envision, and, therefore, finally, have a stronger focus on the long-term intrinsic value of our company. On the next slide, I would like to start the call, as always, today, by drawing your attention to the cautionary language that is included in our safe harbor statement as well as in the materials that we are just in the process of distributing. With that, I hand it over to you, Werner.

All right. Thanks, Oliver, and also welcome from my side. As Oliver already alluded to, it is important for the company, our owners and our customers that we move on and put the uncertainty and ambiguity related to the glyphosate litigation behind us and focus on the substance, value and the perspective of our business instead. To that end, we decided on May 27 to discontinue the national class process and presented a 5-point plan of legal and commercial actions that would allow us to gain more control of the process going forward and actually to provide a path towards closure of the glyphosate litigation. Today, we will discuss further details of the 5-point plan, triggering events and the 2 basic scenarios that will ultimately drive the outcome of the litigation. We will provide you with additional clarity on our next steps, our timing considerations and also financial implications that will inform you regarding potential financial exposure on the one side and the potential of a significantly better upside scenario on the other side. So moving on to Slide 5. As pointed out in our 5-point plan, we are pursuing the appeals process to mitigate or actually, in an optimum scenario, virtually eliminate future glyphosate litigation. We will file our petition seeking U.S. Supreme Court review of the Hardeman case just about in a few weeks in August. Now this is a 2-step approach. First, the Supreme Court could either accept or reject the request to hear our case. Second, if the Supreme Court accepts the petition for review, it could rule obviously in our favor or against our case. The ruling would likely occur in the course of 2022. Hence, we actually see 2 basic scenarios. Let me start with scenario 1. In this scenario, the Supreme Court accepts our case and rules in our favor. A favorable ruling would be that Hardeman's state law failure to warn claims are preempted or barred by federal law, and the EPA's consistent finding that glyphosate is not carcinogenic. The result of such a filing by -- a ruling by the U.S. Supreme Court would then effectively end potential future litigation. Now let's move to scenario 2. In this scenario, the Supreme Court either does not take the case or it takes the case, but rules against us later on. This outcome will lead to further claims and exposure for the company and ultimately also to further payments in years to come. Now we see good chances for scenario 1. Given the substantial legal questions at issue in the glyphosate litigation, we actually do believe that the U.S. Supreme Court should give strong consideration to accepting our petition to review the Hardeman case and render a positive ruling. The reasons for this are as follows. To start, we believe that the Hardeman case presents important legal topics, such as federal preemption as already outlined. On top of it, new studies and regulatory rulings prove that science continues to be on our side. This includes a brief filed by the EPA with the U.S. Court of Appeals for the Ninth Circuit in May in which it affirmed once again that glyphosates, and let me quote the Environmental Protection Agency here, "poses no human health risk of concern" as well as the most recent review in the EU in June with actually unconditional confirmation of glyphosate safety and noncarcinogenicity. Still having said that, we do take scenario 2 as our base case, which we'll discuss later in more detail, and we do consider scenario 1 as a potential upside case. Now moving on to Slide 6. Before we deal with the implications of scenario 2 for future cases, let me first briefly update you on our short-term approach regarding the settlement of the remaining roughly 30,000 cases we have in inventory. We had a very positive development last week when Judge Chhabria ordered that all remaining plaintiffs in the federal MDL must participate in Ken Feinberg's claim resolution program and also complete their fact sheets, or they risk sanctions or dismissal. Considering the impending potential Supreme Court review, we will be very selective in our settlement approach over the next few months. We are reassessing each of the plaintiff firms' claims regarding transparency, quality and value, and we will only settle if all relative criteria are met. If the Supreme Court accepts our petition for review, we will not entertain any further settlement discussions thereafter. Now let's move on to Slide 7, and let's take a look at the mid- to long-term measures. So that means actually scenario 2. Absent a positive ruling by the U.S. Supreme Court, we would have to deal with potential future non-Hodgkin's lymphoma claims in the mid to long term. Here, we must consider potential new claims from people who have used the product in the past and prior to the long-term measures that come into effect after 2022. In this case, we would set up a professionally run claims' administration program with predetermined compensation values whose amounts will be actually similar to the values for current inventory settlements, but, obviously, net of plaintiff lawyers' commissions. So based on available disease statistics for expected annual new cases of NHL, our experience with 96,000 settled cases thus far and a successful pilot program that has been run by special settlement master, Ken Feinberg, we can now provide you with a sound forecast of the potential financial impact of the future cases. As already mentioned, we are using scenario 2 as our base case and will establish an incremental provision in our Q2 '21 closing to account for the company's potential long-term exposure. With that, let's move to Slide 8, and let's take a more detailed look at the key assumptions related to the scenario 2 financial exposure. First, we used the NHL epidemiology and the annual number of new cases as reported by the National Cancer Association. Based on the history of the more than 100,000 claims brought against us, we have assumed the same percentage of claims arising from this base of newly diagnosed cases in the early years with a decline thereafter. Second, and for purposes of the establishment of the provision, we calculate the length of the claims' administration program based on the alleged latency of NHL. Although regulators consistently conclude that the large body of science does not support a causal relationship between NHL and glyphosate and actually, despite scientific opinion substantially differencing -- differing on latency, we have used 15 years in our estimation for modeling purposes. Third, we have assumed that the claims' administration program would be funded on similar per case levels as in our inventory settlements. However, and as already mentioned, of course, net of plaintiff lawyers' fees. Finally, we assume a number of cases would still be tried in court over the next years to come. As a matter of fact, we do welcome selective litigation given that the already strong scientific evidence has only improved over the years, confirming glyphosate and glyphosate-based products are safe when used as directed and do not cause cancer. Very importantly, no jury so far has had the benefits of considering all this extensive evidence. We expect the odds of succeeding in trials to increase in our favor, which is actually a key consideration for us in deciding to pursue the strategy we described today. Now for second scenario, we will include an additional gross provision of USD 4.5 billion or EUR 3.8 billion, and that is before tax and before discounting these provisions in the second quarter of 2021, reflecting the company's, as I already mentioned, potential long-term exposure. The provision will be incremental to the current provision of $2 billion for future cases that would only have covered the first 4 years of the original settlement approach we had proposed to the Federal Court. The incremental provision would come with a tax shield. Regarding cash flow, as mentioned during our call in May, we expect cash flow to improve this year compared to the original assumptions, and we confirm our midterm cash flow projection provided during our Capital Markets Day. The details provided today on the 2 scenarios should provide you with comfort that, based on the methodology we have shared, the glyphosate litigation exposure should now be reasonably accounted for and leave significant upsides in the event of a favorable Supreme Court decision on the case. This should also remove the uncertainty and ambiguity that actually has been weighing on the company and should allow informed investors to direct their focus on operational performance, the quality of Bayer's businesses and its intrinsic value. Moving on to Page 9 and long-term measures. Before we wrap it up, let's look at the long-term mitigation measures that we are working on and which would support the scenario 2 outcome beyond the 15 years that we've shared with you in our current assumptions. First and most important, for the U.S. residential market that accounts for the vast majority of claims, we have engaged with our partners about the future of glyphosate-based products in the U.S. residential market, and we can confirm that we will be replacing all U.S. lawn and garden glyphosate-based products with non-glyphosate-based formulations under the Roundup brand beginning in 2023, assuming timely approval of the new formulations by the U.S. and state regulators. Let me be very clear that this is exclusively geared at managing litigation risk and not because of any safety concerns. Furthermore, I'd like to stress that none of these formulation changes will affect the availability of glyphosate-based products in the markets for professional and agricultural users. Indeed, we know that farmers continue to rely on Roundup containing glyphosate to deliver crops to market using sustainable farming practices that reduce soil tillage, thereby reducing soil erosion and carbon emissions. Second, we are advancing our plans to discuss with the EPA whether there are labeling options for glyphosate-based formulations that provide more information to users about the science as an additional element towards ensuring even more informed purchasing decisions and application decisions. Third, we will set up a new website by the end of 2021 that will provide even more transparency on the extensive science related to glyphosate products. Now let me move on to the summary of my remarks, Page 10. Before we open the line to questions, I just want to share a few closing details. It is important for the company, our owners and our customers that we now move on and put the uncertainty and ambiguity related to the glyphosate litigation behind us and focus on the substance, the value and the perspective of our businesses instead. With our decision to [ continue ] the national class route, we have gained much more control over the process and our next steps. With that, we have been able to compensate -- comprehensively describe to you what our underlying assumptions and financial exposure for the 2 basic scenarios are. We believe the U.S. Supreme Court should strongly consider accepting our petition, which presents important legal topics, such as federal preemption and render a positive ruling. This would effectively and largely end the litigation. Upon acceptance of the case, we will stop all ongoing settlement discussions for the current case inventory. However, we are taking case scenario 2 as our base case and will provision an incremental gross amount of USD 4.5 billion or EUR 3.8 billion, assuming an unfavorable outcome with the Supreme Court for our accounting. This reflects the company's potential long-term exposure and leaves significant upside in the event of a favorable ruling by the U.S. Supreme Court. Following today's update on the glyphosate litigation, the Board of Management is planning to focus more time on driving our business forward in the interest of our customers, patients and shareholders. We have set up a very strong team that reports directly to the Board of Management and that is laser-focused on the further execution of our 5-point plan, while the Board of Management will now fully concentrate on business performance and strategy execution. We will, of course, continue to update you in our standard quarterly reports as part of our financial disclosure. And with that, let me open it now for questions and hand it back to Oliver.

Thank you, Werner. I think, Emma, we can now open up the lines for Q&A.

[Operator Instructions] This question is from the line of Joel Jackson with BMO Capital Markets.

Just 2 questions, just 1 housekeeping question and then I have another one. So if I do all the math, it looks like the total glyphosate payout you're expecting for current and future claims and charges you're taking, in case you're not successful with scenario 1, would be -- it seems like $14 billion to $14.8 billion. I just wanted to get confirmation on that. And the second question I have is, as you look at the residential market to replace glyphosate as the active ingredient in Roundup and other products, what other types of active ingredients are you considering? What is your thought with the efficacy of that product versus current Roundup? How might that affect your sales and your market share?

Okay. So thanks for your question, Joel. So Wolfgang is taking your first question on the total number. And secondly, I'll start and then Liam will chime in on your second question.

Yes. Very quickly, Joel, thanks for your question. I'll answer the question this way. If you recall what we had on the books before, it was 9.6-ish for the current too, for the futures. And then you should assume for completeness that we accrued also for administrative costs, for defense costs and so on. We have to disclose that, but it's by no means anywhere close to the other 2 numbers. And then simply, you add $4.5 billion to that. With that, you come out as a number slightly higher what you mentioned. Again, the numbers are all in U.S. dollars, right? And again, we can obviously not -- we obviously have a tax shield here as well. And just for completeness' sake, it will not cover anything close to the amount. It's an insurance coverage that we have, and I think we said before, that this is typical of what's happening in the industry. I think we also said before, it's in the low hundreds millions. But this is also the type of thing that you cannot put a receivable up again. So if you want a complete picture, you would have to consider taxes, currencies and insurances as well.

All right. Thanks, Wolfgang. So on the second question, we are working with a number of standard ingredients for new and proprietary formulations that would be awaiting EPA approval. It would be sold under the Roundup brand. And then based on what we think is certainly superior to what is out there in the market. But maybe, Liam, you want to share a little bit more detail on it and how we think about that franchise in the market.

Yes, sure. Thanks, Joel, for the question. So we plan on replacing from beginning of 2023 because this, from a regulatory and from a logistical point of view, wouldn't be possible any earlier than this. As Werner already mentioned, the active ingredients are well-established active ingredients. What is new will be the formulation or formulations, plural because there'll be multiple new formulations. And these registrations are pending approval at the EPA. And once we have more news from the EPA, then we would give more details on that.

The next question comes from the line of Vincent Andrews with Morgan Stanley.

Can you confirm that your Supreme Court petition is going to include more than just a request or review on preemption? So I'm assuming causation and punitive damages as well just because I get that the ultimate goal is to get the preemption ruling. But it would also seem that if they didn't go for -- opined for you on preemption that there's other ways that they could provide significant relief that would make trying these cases maybe not as unattractive as a preemption ruling, but somewhere in the middle. So can I just start there?

All right. Thanks, Vince. So Bill is going to take your questions. Bill, please?

Vincent, yes. And while I won't give you the exact specific arguments, your assumption, though, is correct. We will be seeking the writ on multiple grounds that have cross-cutting impact on the litigation. You're undoubtedly aware that issues in the litigation and in the Hardeman case concerned already as well the preemption argument, Daubert and the expert standard and causation as you mentioned and others, and we do plan on raising several issues with the Supreme Court, not just preemption.

Okay. And then my understanding is that the Carson case, which you prevailed on a trial on preemption, is working its way through the Eleventh Circuit on appeal. And I don't believe that, that case will be -- have been decided by the Eleventh Circuit by the time the Supreme Court looks at Hardeman. So I guess, my question is, in the event that the Supreme Court does not take the case on Hardeman, from what you've laid out there, it doesn't seem like you feel like you're going to wait and see whether you get the true Circuit split with Carson and then revisit the Supreme Court. Or are you just not talking about that to keep things simple?

Bill?

Yes, yes. Assuming the Carson appeal is not ready for advancement, as you accurately point out, we are moving ahead expeditiously with Hardeman. We view, as I think we've said in the past, as the best candidate for review by the U.S. Supreme Court. And certainly, Carson, which may well continue through the legal and appellate process, may well help manage future liability. It's a little premature to make decisions about those cases as far as the U.S. Supreme Court, but we're moving ahead on the time line announced on Hardeman, irrespective of the Carson timing.

Okay. And then lastly, Werner, if I could just ask you, if we assume that the -- in the hypothetical that the Supreme Court takes the case, it rules for you on preemption. The litigation is largely eviscerated. And let's say, a year later, the equity is still trading at a significant sum of the parts discount. Would you consider separating the agriculture assets or making some other structural change to try to unlock that value for shareholders?

That's a very good question, Vince. But today, this call is about the litigation exposure and not about strategy of the company. I think we are very clear on the strategy that we are pursuing and that we are executing on. And absent any other news, you should assume that we will continue to execute on our existing strategy. We -- let's say, our most important topic is that we have to put an end to this litigation and provide the necessary clarity on the space that we see when it comes to how the litigation is going to be put to bed. And that is actually the most important objective we have to provide that transparency to our shareholder base, so that you can take your conclusions from it. This is not one dimensional. We have 2 basic scenarios. I think and I hope that this call is really helping you to get your hands around, a, the specific scenarios that we are describing and then there are, of course, shades of gray in between those, depending on the quality of the rulings and other things, but also very, importantly, on the underlying assumptions, so that you can kind of follow our thoughts. And also, and as you mentioned that earlier, you're doing the math on our calculus that you can kind of follow what we are doing also in terms of the orders of magnitude that we are seeing going forward, should we be in the less favorable scenario 2, yes? So I think that is -- it's a very, very important objective of today's call.

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

A few housekeeping questions and then one kind of big picture question, please. First, kind of from a housekeeping perspective, can you remind us what proportion of glyphosate use today -- or Roundup use today is in the noncommercial setting? Secondly, again, kind of from a housekeeping perspective, perhaps for you, Wolfgang. How should we think about the tax shield on the $4.5 billion as it relates to your guidance for 2021? I suspect you will get the entire benefit of that, but if you can confirm that, that would be good. And then just lastly, if I look at your Slide #8, you've laid down the mechanics of how you come to the $4.5 billion, but I'm wondering if you might be able to help us a bit more to say your cost per case, excluding or adjusting for the plaintiff lawyer fees, kind of how should we think about that number. And consequently, what is the number of future claimants that you are inherently incorporating in that? So those are kind of housekeeping questions. And then kind of Werner for you at the start, you kind of stepped out the call by saying you wanted to essentially highlight the intrinsic long-term value in the Bayer stock, which kind of we don't disagree with. But I suspect my question to you is, as you have spoken to your long-term investors over the course of the last kind of few years, beyond the litigation, what are some of the issues that they have highlighted? And what are you trying to do to resolve those issues?

All right. Thanks for the question. Maybe on glyphosate and the nonresidential use, that's a question that will be answered by Liam. And then tax shield is covered by Wolfgang, and I'll take the 2 last questions then.

Yes. Thanks, Keyur, for the question. So I'm glad to say that I think the right way to think about this is from a claims point of view. Over 90% of all claims have come from the lawn and garden segment. So this is clearly the reason why we're also discussing new active ingredients and replacing glyphosate in the lawn and garden segment. The professional segment is, of course, a completely different -- the agricultural segment is a completely different segment with very different volumes, of course, than would be typically used in consumer market, different labels as well because you have different dosages that are used. So this one is completely different. And we think from an overall labeling point of view, it is a very well protected market. So we focused our efforts really on the lawn and garden because over 90% of all claims have come from that segment.

And I'll take the tax question. Yes, it's tax deductible. We are thinking of the tax shield in 10% to 15% range. But as you can appreciate it, it depends on a number of factors. It depends on when do the payments actually happen. It also depends on the future income that you have that you can deduct it from. And as you know, there is a lot of music in the worldwide tax system. It depends also on tax legislation going forward. So you should not assume that, that's a onetime upfront effect. We will guide you through that with our annual guidance on our core tax rate, but 10% to 15% over time depending on these 3 factors that I mentioned.

All right. Thanks, Wolfgang. So Keyur, to your third question on the cost per case and reflecting on the details on Page 8, what we've tried to do is to give you as much information as possible related to our modeling short of weakening our position when it comes to defending our interests with the claim holders. And it is in that context that I cannot and will not give you the number. I do hope, though, that with the details laid out that you kind of can back into orders of magnitude, absent us, you're -- giving you a number that would then also have to be very specific to the settlement program -- or the compensation program that we are thinking about going forward. When it comes to the -- my statement on the intrinsic value of the company, we are in charge of running the company. And we are, of course, also, let's say, in charge of trying -- giving you the gist of what we think about our businesses, how we run them, what we see in the potential, also longer term. And I would still start though with the fact that based on also one of the recent analyst reports that you will for sure have read, the biggest issue that kind of hangs over the stock, that prevents me from coming into the stock because nobody wants to go to his Investment Committee and argue the case with an unknown or unclear litigation overhang is a big issue that we need to put to bed, yes? And that is exactly what we are doing today. We have to move on, let's say, the 2 scenarios -- basic scenarios are well described. We are able to assess them also in terms of, let's say, valuation. We take a conservative approach with some of the assumptions. We create transparency with what we are putting on the balance sheet for the scenario 2. And then we'll see what's going to happen. But the downside scenario is kind of provided for in the balance sheet, and we'll have to see what the Supreme Court is going to do over the next 12 months. When it comes to the underlying of our businesses, I'd point out the following topics. A very, very well run and successful consumer health business that is on a strong growth trajectory, also looking at its peer universe with top line growth and also margin improvements fully along the lines of what we mentioned a couple of years ago on where we would take that business; strong underlying innovation that is coming to market, which we will share more of going forward. I think in Pharma, people have hopefully are now a better understanding on how we think about the midterm profile, in particular, the fact that there is no, let's say, one-off significant patent cliff that would be related to Xarelto, but that is a process over multiple years. And as a matter of fact, we only see a small dip -- single-digit dip in our top line in 2024. We are beefing up our innovation pipeline with some technology acquisitions, platform acquisitions. We brought all of our late-stage pipelines into the market by now. And last but not least, we run the hands down best crop business in the world, which is all clouded by the fact that we have the litigation overhang still and as of today. That's what I would say regarding your fourth question.

If I could just follow up with Liam on -- I guess what the number I'm looking for was what proportion of your glyphosate revenues or your Roundup revenues today comes from the noncommercial setting. So I understand 90% of cases come from this setting, but what proportion of your revenues come from that setting?

What proportion of glyphosate from total company sales, Keyur? Yes. So it's kind of your -- the other way around, we have a "royalty stream" and, of course, a supply relationship with our partner on the residential fees, which in terms of the revenue share is a very small piece of the overall nonselective herbicides franchise that we have, yes? And so the vast majority of the cases is related to a relatively small or a very small part of the Roundup business. And with the new formulations, I think it's also important to understand that we are putting them underneath the Roundup brand, which means that there is no significant erosion that we would expect from the residential market because it continues to be a marketed product just with a different formulation under an [ ultra strong ] brand and a wholesale brand in the U.S.

The next question comes from the line of Richard Vosser with JPMorgan.

Maybe I could ask a related question on the PCB litigation. We obviously saw a case of some teachers that some -- that Bayer lost last week. Maybe you could put that into context for us in terms of how you see the PCB litigation developing relative to Bayer's agent and how that is different in terms of the timing and the potential of that litigation going forward. And then second question, maybe a clarification, and apologies if I've misunderstood this, but your talk of discounting the provision. Is the provision therefore less than the EUR 3.8 billion that you will establish? Or is the EUR 3.8 billion sort of the discounted amount? it sounded like that amount would be discounted potentially over 15 years. And therefore, the actual provision established would be quite a significantly amount lower than that. But just please some clarity there. I might have got that wrong.

Yes. Thanks, Richard, for your question. I suggest we go right to your second question first. So Wolfgang will answer that question on the discounting before we hand it over to Bill to talk about PCB and what is different from glyphosate here.

Yes, Richard. A very short answer. The numbers that you will see next week in the financials is USD 4.5 billion. That would be EUR 3.8 billion. And then if you discount it, like you said, to today, it will be approximately EUR 3.5 billion that will actually end up in the balance sheet. Just probably for your modeling purposes, it's important to also understand that accounting regulations say that you discounted the risk-free rate and not at the WACC. So that's why this number doesn't go probably more down than your intuition would show.

So Bill, on PCB, please?

Yes. Thank you. Let me address your question by perhaps providing you first with the reason why this verdict is not supported by the undisputed evidence in the case, the next steps in terms of post-trial and appeal steps and as well why there is not an expectation of proliferation to answer your question. First, why the jury verdict is not supported. And while we thank the jury for their service, we disagree with the verdict. The undisputed evidence in the case does not support the conclusions that plaintiffs were exposed to unsafe levels of PCBs or that any exposure could have possibly caused their claimed injuries. In reality, the testing reflected extremely low levels of PCBs in the school. The plaintiff serum tests revealed normal PCB levels found in the U.S. population according to the Centers for Disease Control and Prevention. So these are important points to make about the underlying trial. In terms of next steps, the plan is to pursue post-trial motions and, if necessary, an appeal, where we believe we have strong appellate arguments given the legal and evidentiary issues at trial, including the application of the law and plaintiffs' exposure and causation experts using methodologies to estimate exposure levels different than what I stated in my opening comment. Lastly, in terms of the no expectation of similar proliferation, to answer your question, let me just make sure I'd point out some context. PCBs, as you may know, were made by the former Monsanto company between roughly the 1930s and the 1970s when they were stopped in their manufacturing in about 1977. They're in no way related to the current Crop Science business, now part of Bayer or any other recent company business. And in terms of the claims, there's no expansion or triggering event for widespread claims. Erickson, the case that you mentioned, is a small number of approximately 200 claims at 1 location, a school called Sky Valley Education Center where people alleged injuries from exposure to light ballasts at this single school. The ballasts were produced decades ago by Monsanto's customers and installed in the late 1960s and were decades beyond their useful life, certainly energy inefficient and obsolete. And without any widespread trigger event like IARC, which triggered the glyphosate discussion, plaintiffs in this case alleged personal injuries derived from exposures at this 1 location, claiming a variety of ailments like dry cough, peeling skin, orthopedic complaints, eczema, fatigue, fuzzy thinking and anxiety and the like. It does not entail any widespread allegations of cancer or product exposure along those lines. I mentioned already the levels of exposure being limited. And for those reasons, as well as the fact that we have, in fact, defended successfully many cases over the years without adverse verdicts, we do not expect proliferation of the type you asked about in your question and, instead, rather believe this is a confined litigation that we will continue to litigate, as I mentioned in my earlier comments.

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

A few questions, please. One -- I think they're all for Bill. Bill, I think one of the problems that you've had is sort of the unpredictability of judges in the process. We've seen one of the judges refer some NDL cases to your self-help program, which I guess is a good sign. I was wondering if you could quickly comment on how you read that. But then maybe, more importantly, what part of the process that you're going through at the moment is still exposed to some potential interference by judge's actions, if any? And then just quickly going back to the PCB question. So it sounds like you're saying there is no risk that this could go down a mass tort route, unless there are more adverse rulings, which I guess you're thinking won't be happening. But how many cases beyond the 200 that you just referred to are actually filed against you this point in time in and around PCB?

All right. Michael, thanks for your 3 questions. And Bill, please.

Yes. First, yes, it's a very positive sign. We think it's very helpful that Judge Chhabria has ordered that parties engage in mediation. Our settlement program has enjoyed great success to date, and we want that to continue and the judge's orders would both require participation as well as the provision of substantiation for the claims without which there can be potential sanctions or dismissals is a very important step to continue to work on the selective inventory settlements with the criteria that Werner outlined in his beginning remarks. Certainly, we wish and we are also finding judges in other courts who recognize the benefits of the resolution programs, and we'll continue to seek those and do get help in that regard, which is certainly an important feature to continuing our settlement and resolution efforts. In terms of the PCB building case, it's this 1 location and, as I mentioned, about 200 claimants.

The final question is from the line of Sebastian Bray with Berenberg.

I would have 2, please. Firstly, why are cases for glyphosate no longer growing? We've been at the 125,000 total cases filed mark for a while. And about 80,000 people fall sick with NHL in the U.S. every year. Is it simply that these lawyers you've settled with have stopped taking cases? Or is there something else going on there? And secondly, just to step away from the immediate U.S. litigation environment for glyphosate. What are you thinking about the chances of getting the product reapproved in Europe? And is this included -- is a nonrenewal included in the business plan that you set out at the Capital Markets Day a few months ago?

Yes. Okay. Thanks, Sebastian. I hope I understood your first question correctly. So you're referring to the 125,000, why that case count is not growing, the reason is very simple that for that inventory, we put a cutoff date in it, yes? And should there be further cases, we would see those in the future as they are further building, yes? So we have 125,000, that frames kind of the inventory that we are looking at, so there's no magic to it. And you simply -- as you have done, you would have to continue to look at epidemiology, yes? And then your incidents and the case count out of an annual count of NHL would come into claims. Second, on the chances for reapproval, Liam is going to take that question.

Yes. Thanks, Sebastian. So I think you saw earlier this year, we had good news from a scientific point of view, that the Europe -- the responsible European working group, which accounts -- which is, in essence, 4 countries and subsets of the regulatory authority is building a formal opinion about the science behind glyphosate. And they were quite unanimous in their opinion that this is clearly an approvable product, that it has a very beneficial safety profile. So from a science point of view, we think this is a very strong starting place now. We'll see how it goes as we go along -- further along the process. But I think what's important to highlight as well, because you're asking for the kind of the relative dimension and whether this is factored in from a capital markets outlook point of view, sales of glyphosate in Europe are only a fraction of global glyphosate sales. The vast majority of sales are in North and Latin America. And with that, we wouldn't -- we don't see any material impact on our CMD outlook, regardless of what happens with EU registration.

Yes. Maybe one additional point to be had is -- and just to add to what Liam has said. There is -- I think, as we have seen in the last approval process, there's a scientific assessment piece and then there is, let's say, a "political risk," yes, if you want to call it that way, as part of the process. And if you look at the report that was issued on the scientific assessments, the one thing that I found remarkable, you'll see that very early in such an absolute language, the report said that glyphosate is not carcinogenic and it's not genotoxic, yes, in that absolute language, which you see very rarely, yes? And the second piece is that, of course, based on how that process is going to run going forward now, we will have to look at what the member states, too, and what the commission does, yes? But overall, very, very supportive and strong confirmation of the science so far. And with that, let me just hand it back to Bill for a couple of additional comments.

Yes. Thank you. You asked also about additional cases and the settlements with leadership. And yes, we have, in fact, reached settlement with large groups of leadership lawyers who have left the litigation. And when you also look at what's happening atmospherically or across the litigation as a whole, there's a couple of other observations I'd suggest for your consideration. First, we've seen some lower courts, both in Carson and most recently in California, rule in our favor on preemption. And as well, there continues to be a strong consensus among regulators and scientists worldwide that glyphosate-based products pose no risk of harm when used according to the label. And Werner mentioned those in terms of the EU recently completing its first step in the renewal process and finding -- no finding with respect to carcinogenity. In May, the Biden EPA told the Federal Court that it's not likely to be a human carcinogen and poses no human health risks of concern. And the IARC finding at the center of this litigation continues to be an outlier. And as more time passes, more and more study occurs, it continues to be just that, an outlier. And so when you look at the developments, both in the law preemption, as I mentioned, and in terms of the science, it continues to develop in a manner, which is consistent with what we've been saying all along that the product is not carcinogenic. And I think that's an important observation as well in terms of the continued litigation sequencing or proliferation, as you asked about it.

At this time, there are no further questions. And I hand back to Mr. Maier for any points he wishes to raise.

Thank you so much, Emma. Really appreciate everybody joining today. I know we're busy. Thanks for listening, and we'll talk to you soon next week. Thank you. Take care.

Ladies and gentlemen, this concludes the investor conference call of Bayer AG. Thank you for participating. You may now disconnect.