Legal Risks

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

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

Product-related litigation

Yasmin™ / YAZ™: Most of the lawsuits and claims concerning Bayer’s drospirenone-containing oral contraceptives in the United States have been resolved. Claimants allege that users have suffered personal injuries, some of them fatal, from the use of Yasmin™ and / or YAZ™ or their generic versions, and seek compensatory and punitive damages, claiming, in particular, that Bayer had not adequately warned of the alleged risks.

As of January 23, 2017, lawsuits and claims of approximately 100 claimants remain pending against Bayer in the United States. Without admission of liability, Bayer is considering about a dozen of the lawsuits and claims for possible settlement after a case-specific analysis of medical records.

A few U.S. State Attorney Generals are investigating alleged violations of consumer protection statutes, including off-label promotion and failure to warn. One Attorney General has filed an action against Bayer.

As of January 23, 2017, 13 lawsuits seeking class action certification had been served upon Bayer in Canada. In two of these lawsuits a class has been certified. Two motions for certification of a class action are pending in Israel.

Bayer believes that it has meritorious defenses and will continue to defend itself vigorously against all claims that are not considered for settlement.

Mirena™: As of January 23, 2017, lawsuits from approximately 2,600 users of Mirena™, a levonorgestrel-releasing intrauterine system providing long-term contraception, had been served upon Bayer in the United States (excluding lawsuits no longer pending). Plaintiffs allege personal injuries resulting from the use of Mirena™, including perforation of the uterus, ectopic pregnancy or idiopathic intracranial hypertension, and seek compensatory and punitive damages. Plaintiffs claim, inter alia, that Mirena™ is defective and that Bayer knew or should have known of the risks associated with it and failed to adequately warn its users. Additional lawsuits are anticipated. Most of the cases pending in U.S. federal courts have been consolidated in a multidistrict litigation proceeding for common pre-trial management. In July 2016, the multidistrict litigation court granted summary judgment dismissing approximately 1,230 cases pending before that court. Plaintiffs have appealed the decision. As of January 23, 2017, five Canadian lawsuits relating to Mirena™ seeking class action certification had been served upon Bayer. Bayer believes it has meritorious defenses and intends to defend itself vigorously.

Xarelto™: As of January 23, 2017, U.S. lawsuits from approximately 16,400 recipients of Xarelto™, an oral anticoagulant for the treatment and prevention of blood clots, had been served upon Bayer. Plaintiffs allege personal injuries from the use of Xarelto™, including cerebral, gastrointestinal or other bleeding and death, and seek compensatory and punitive damages. They claim, amongst other things, that Xarelto™ is defective and that Bayer knew or should have known of these risks associated with the use of Xarelto™ and failed to adequately warn its users. Additional lawsuits are anticipated. Cases pending in U.S. federal courts have been consolidated in a multidistrict litigation for common pre-trial management. As of January 23, 2017, ten Canadian lawsuits relating to Xarelto™ seeking class action certification had been served upon Bayer. Bayer believes it has meritorious defenses and intends to defend itself vigorously.

Essure™: As of January 23, 2017, U.S. lawsuits from approximately 3,700 users of Essure™, a medical device offering permanent birth control with a nonsurgical procedure, had been served upon Bayer. Plaintiffs allege personal injuries from the use of Essure™, including hysterectomy, perforation, pain, bleeding, weight gain, nickel sensitivity, depression and unwanted pregnancy. Additional lawsuits are anticipated. As of January 23, 2017, two Canadian lawsuits relating to Essure™ seeking class action certification had been served upon Bayer. Bayer believes it has meritorious defenses and intends to defend itself vigorously.

In connection with the above-mentioned proceedings, Bayer is insured against statutory product liability claims against Bayer to the extent customary in the respective industries and has, based on the information currently available, taken appropriate accounting measures for anticipated defense costs. However, the accounting measures relating to Yasmin™ / YAZ™ and Essure™ claims exceed the available insurance coverage. Concerning Yasmin™ / YAZ™, the accounting measures include costs for agreed and anticipated future settlements based on the information currently available and based on the number of pending and estimated future claims alleging venous clot injuries.

Patent disputes

Beyaz™ / Safyral™: Beyaz™ and Safyral™ are Bayer’s oral contraceptives containing folate. In 2015, a U.S. federal court ruled in favor of Bayer regarding both the validity of its patent and the infringement thereof by Watson Laboratories, Inc. (“Watson”). Watson had filed Abbreviated New Drug Applications with a Paragraph IV certification (“ANDA IV”) seeking approval of generic versions of both Beyaz™ and Safyral™ in the United States. In May 2016, the U.S. Court of Appeals for the Federal Circuit invalidated the patent claims asserted by Bayer and reversed the judgment by the U.S. federal court. Bayer petitioned the U.S. Supreme Court to review the decision by the U.S. Court of Appeals for the Federal Circuit. In January 2017, the U.S. Supreme Court denied Bayer’s petition. The decision by the U.S. Court of Appeals for the Federal Circuit against Bayer is now final. In 2015, Bayer filed two lawsuits against Lupin Ltd. and Lupin Pharmaceuticals, Inc. (together “Lupin”) in a U.S. federal court for infringement of the same patent. Prior to this in 2015, Bayer had received two notices of an ANDA IV application by Lupin seeking approval to market generic versions of Safyral™ and Beyaz™ in the United States. In view of the May 2016 decision by the U.S. Court of Appeals for the Federal Circuit, the U.S. federal court ruled in favor of Lupin in November 2016. This decision is now also final.

Betaferon™ / Betaseron™: In 2010, Bayer filed a complaint against Biogen Idec MA Inc. in a U.S. federal court seeking a declaration by the court that a patent issued to Biogen in 2009 is invalid and not infringed by Bayer’s production and distribution of Betaseron™, Bayer’s drug product for the treatment of multiple sclerosis. Biogen is alleging patent infringement by Bayer through Bayer’s production and distribution of Betaseron™ and Extavia™ and has sued Bayer accordingly. Bayer manufactures Betaseron™ and distributes the product in the United States. Extavia™ is also a drug product for the treatment of multiple sclerosis; it is manufactured by Bayer, but distributed in the United States by Novartis Pharmaceuticals Corporation, another defendant in the lawsuit. In March 2016, the U.S. federal court decided a disputed issue regarding the scope of the patent in Biogen’s favor. Bayer disagrees with the decision, which may be appealed at the conclusion of the proceedings in the U.S. federal court.

Damoctocog alfa pegol (BAY 94-9027, long-acting rFVIII): In 2013, Bayer filed a lawsuit against Nektar Therapeutics in the district court of Munich, Germany. In this proceeding, Bayer claims rights to certain European patent applications based on a past collaboration between Bayer and Nektar in the field of hemophilia. The European patent applications with the title “Polymer-factor VIII moiety conjugates” are part of a patent family registered in the name of Nektar comprising further patent applications and patents in other countries including the United States. However, Bayer believes that the patent family does not include any valid patent claim relevant for Bayer’s drug candidate BAY 94-9027 for the treatment of hemophilia A.

Nexavar™: In 2015, Bayer filed patent infringement lawsuits in a U.S. federal court against Mylan Pharmaceuticals Inc. and Mylan Inc. (together “Mylan”). In 2014 and 2015, Bayer had received notices of an ANDA IV application pursuant to which Mylan seeks approval of a generic version of Bayer’s cancer drug Nexavar™ in the United States. In November 2016, Bayer received another notice of such an ANDA IV application by Teva Pharmaceuticals USA, Inc. In December 2016, Bayer filed a patent infringement lawsuit against Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries LTD in the same U.S. federal court.

Stivarga™: In December 2016, Bayer filed patent infringement lawsuits in a U.S. federal court against Apotex, Inc. and Apotex Corp. (together “Apotex”) and against Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries LTD (together “Teva”). In November 2016, Bayer had received notices of an ANDA IV application pursuant to which Apotex and Teva each seek approval of a generic version of Bayer’s cancer drug Stivarga™ in the United States.

Xarelto™: In 2015, Bayer and Janssen Pharmaceuticals, Inc. filed a patent infringement lawsuit in a U.S. federal court against Aurobindo Pharma Limited, Aurobindo Pharma USA, Inc. (together “Aurobindo”), Breckenridge Pharmaceutical Inc. (“Breckenridge”), Micro Labs Ltd., Micro Labs USA Inc. (together “Micro Labs”), Mylan Pharmaceuticals Inc., Mylan Inc. (together “Mylan”), Prinston Pharmaceutical Inc. (“Prinston”), Sigmapharm Laboratories, LLC (“Sigmapharm”), Torrent Pharmaceuticals, Limited and Torrent Pharma Inc. (together “Torrent”). Earlier in 2015, Bayer had received notices of an ANDA IV application by Aurobindo, Breckenridge, Micro Labs, Mylan, Prinston, Sigmapharm and Torrent, each seeking approval to market a generic version of Xarelto™, an oral anticoagulant for the treatment and prevention of blood clots, in the United States. In January 2016, Bayer received another notice of such an ANDA IV application by InvaGen Pharmaceuticals, Inc. (“InvaGen”). In February 2016, Bayer and Janssen Pharmaceuticals, Inc. filed a patent infringement lawsuit against InvaGen in the same U.S. federal court.

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

Further legal proceedings

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

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

In the Lower Passaic River matter, a group of more than sixty companies including Bayer is investigating contaminated sediments in the riverbed under the supervision of the United States Environmental Protection Agency (EPA) and other governmental authorities. Future remediation will involve some form of dredging, the nature and scope of which are not yet defined, and potentially other tasks. The cost of the investigation and the remediation work may be substantial if the final remedy involves extensive dredging and disposal of impacted sediments. In the Newark Bay matter, an unaffiliated party is currently conducting an investigation of sediments in Newark Bay under EPA supervision. The investigation is in a preliminary stage. Bayer has contributed to certain investigation costs in the past and may incur costs for future investigation and remediation activities in Newark Bay.

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

Asbestos: A further risk may arise from asbestos litigation in the United States. In many cases, the plaintiffs allege that Bayer and co-defendants employed third parties on their sites in past decades without providing them with sufficient warnings or protection against the known dangers of asbestos. Additionally, a Bayer affiliate in the United States is the legal successor to companies that sold asbestos products until 1976. Union Carbide has agreed to indemnify Bayer for this liability. Bayer believes it has meritorious defenses and intends to defend itself vigorously.

Covestro U.S. Lawsuit: In September 2016, Covestro LLC – along with three other defendants – was served with a lawsuit filed by a law firm in a California federal court. The parties recently agreed to change the venue to a federal court in the District of Columbia. The aim of the lawsuit is to recover financial damages in the form of statutory fines allegedly owed by the defendants to the United States Environmental Protection Agency for the companies’ failure to disclose health risk information associated with the manufacture and handling of TDI, MDI and PMDI. Under the pertinent statutes, the U.S. government was afforded an opportunity to intervene and prosecute the claims, but it has declined to do so. Accordingly, the law firm is prosecuting the claims on the government’s behalf. Violations of the Toxic Substances Control Act (“TSCA”) and False Claims Act (“FCA”) are asserted. Covestro will defend itself vigorously and regards the claims asserted against the company as meritless.

Tax proceedings:

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