Bayer shocked investors this week when it halted a trial of its most promising new drug after discovering it did not work as well as planned.

But for the German group’s recently installed chief executive Bill Anderson, who has more than two decades of experience in the pharmaceuticals industry, such disappointments are just part of the game.

While he told investors that he “deeply regrets” the 18 per cent collapse in the company’s share price after the move, he pointed out that the industry “comes with really high stakes and a high risk profile”. Setbacks like this were “unavoidable” in the quest for medical breakthroughs, he said. “We keep going!”

The abandoned late-stage trial of blood-thinner asundexian highlights the steep challenges facing Anderson, who joined the 160-year-old creator of Aspirin and maker of weedkiller Roundup this year after running Roche’s pharma unit.

Saddled with €39bn in debt and suffering from poor cash generation, Bayer is facing shareholder calls for a break-up. Days before the asundexian revelation, the group was hit by a huge litigation loss in the US, where a Missouri jury ordered the company to pay more than $1.5bn to plaintiffs who blame Roundup, which joined Bayer’s portfolio through the German group’s 2016 acquisition of Monsanto, for their cancer.

The new chief executive arrived with a promise to slash red tape in a push to turn Bayer into a nimble and fast-moving organisation where employees act like entrepreneurs.

Last month he blasted Bayer’s performance as “unacceptable” and stressed that “all options” were on the table, including splitting the pharma unit from the crop science division. However, he also tested investors’ patience with his insistence that he needed until early 2024 to scrutinise options.

Analysts expect a sale of the consumer health unit, which makes over-the-counter drugs and is estimated to be worth about €18bn, is the most likely scenario.

“Anderson really has no time to lose any more,” said Thomas Schweppe, a Frankfurt-based shareholder adviser, adding that management needed to tackle the issues swiftly to prevent making matters worse. “Bayer is running out of options strategically as well as financially.”

Anderson disputes that view, according to people familiar with his thinking who said he was in frequent contact with large shareholders who are telling him to “take your time and get this right”.

The pharma unit, which generates almost half the group’s revenue, is facing the loss of exclusivity over its two best-selling drugs by 2026 as patents for blood-thinner xarelto and eye treatment eylea run out. Their €7.7bn in combined sales last year accounted for 40 per cent of the division’s total.

“The company needs money to invest in pharma, which is subscale and has a pipeline issue,” said Marco Taricco, a partner at Bayer shareholder Bluebell Capital Partners who this week renewed his calls for a “decisive portfolio restructuring”.

After the dashed hopes over asundexian, which Bayer had hoped would eventually generate up to €5bn in annual sales, the company is left with three prospective blockbuster drugs: nubeqa, a new treatment for prostate cancer; kerendia for chronic kidney disease; and elinzanetant for menopause symptoms.

Bayer hopes nubequa and kerendia, which have already been introduced to the market and last year generated €600mn in combined sales, can each eventually generate up to €3bn in annual sales. Elinzanetant could be launched by 2025 and the company believes it may generate peak sales of more than €1bn a year.

Stefan Oelrich, head of pharma, has embarked on an M&A spree over the past few years to offset the patent cliff, forking out billions of euros on companies that specialise in cell and gene therapy. However, it will take years until the acquisitions can replace the group’s ageing blockbuster drugs.

Anderson is also facing new concerns over the Roundup litigation, one of the biggest product liability cases in corporate history.

Tens of thousands of US citizens blame glyphosate, the herbicide’s active ingredient, for their cancer. A $10.9bn settlement in 2020 failed to resolve the problem and the company is still facing new claims. Having lost four court cases since summer, investors are fretting that the $6.4bn Bayer has provisioned may not be enough.

It is standing its ground in the courts, taking on an army of US trial attorneys in a test of cash and nerves.

Its key argument is that there is a scientific consensus that glyphosate does not cause cancer. The European Commission last week renewed glyphosate for use, saying “there is currently no evidence” to classify it as carcinogenic.

Wolfgang Nickl, chief financial officer, told journalists this month the company never expected to win every case and that it would stick to its strategy, while pointing to recent court wins in California and Hawaii. 

“We have no appetite to write humongous checks in a time where we have little free cash flow,” he said, particularly given “our product is safe when used as directed”.

The battle between Bayer and the glyphosate plaintiffs has become a war of attrition. While the claimants try to push the company towards generous settlements, Bayer hopes courtroom losses may discourage future claims as litigation lawyers see potential payouts dwindle.

While the plaintiff in one of the four cases Bayer recently lost was awarded $175mn, the amount granted in another was just €1.25mn. “That’s not going to be a strong incentive to keep going,” Nickl told analysts on a recent call, arguing the sum did not come close to covering trial attorneys’ legal costs.

Trial lawyers spent $1.2mn on US advertisements in September to solicit people allegedly affected by Roundup, according to X Ante, a firm that tracks litigation advert spending. The spending remained the same from August, but the number of ads dropped by 42 per cent.

Markus Manns, a portfolio manager at Germany’s third-largest asset manager Union Investment, which holds a 0.6 per cent stake in Bayer, said the recent string of courtroom losses could suggest the company had not been selective enough in picking the right cases for litigation.

“I think it would make sense to adjust the legal strategy to try to settle those cases which Bayer is at risk of losing in court,” he told the FT, adding that “every lost court case will further damage investor sentiment”.

But while Bayer’s share price has fallen to a level last seen in 2009, some investors have not lost their optimism.

“We still think the business is such an asset-rich company with such great potential,” said McCoy Penninger, a partner at McGinn Penninger Investment Management, whose small stake in Bayer represents 3 per cent of the US firm’s portfolio. Some “bold decisions at the corporate level” could unlock that potential, he said, adding that the current slump could very well be a buying opportunity.