Explanatory Notes Legal Risks To find out more about the Bayer Group’s legal risks, please see Note “Legal Risks” to the consolidated financial statements in the Bayer Annual Report 2017, which can be downloaded free of charge at www.bayer.com. Since the Bayer Annual Report 2017, the following significant changes have occurred in respect of the legal risks: Product-related litigation Mirena™: As of October 30, 2018, lawsuits from approximately 2,300 users of Mirena™, an intrauterine system providing long-term contraception, had been served upon Bayer in the United States. 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. Additional lawsuits are anticipated. As of October 30, 2018, lawsuits from approximately 680 users of Mirena™ alleging idiopathic intracranial hypertension had been served upon Bayer in the United States. In April 2018, the Master Settlement Agreement regarding the global settlement of the perforation cases for a total amount of US$12.2 million was executed. Bayer may withdraw from the agreement if fewer than 98% of those who are eligible choose to participate. As of October 30, 2018, a total of approximately 4,600 cases would be included in the settlement. Xarelto™: As of October 30, 2018, U.S. lawsuits from approximately 24,700 recipients of Xarelto™, an oral anticoagulant for the treatment and prevention of blood clots, had been served upon Bayer. Plaintiffs allege that users have suffered personal injuries from the use of Xarelto™, including cerebral, gastrointestinal or other bleeding and death, and seek compensatory and punitive damages. Additional lawsuits are anticipated. As reported in the Bayer Annual Report 2017, the first three federal trials and the first Pennsylvania state court trial resulted in complete defense verdicts. In April and August 2018, the second and third Pennsylvania state court trials also resulted in complete defense verdicts. In April and August 2018, the second and third trial in Pennsylvania state court both also resulted in a complete defense verdict. Appeals and post-trial motions are pending in all cases. Essure™: As of October 30, 2018, U.S. lawsuits from approximately 18,000 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, and seek compensatory and punitive damages. Additional lawsuits are anticipated. Class actions over neonicotinoids in Canada: In February 2018, a court in Quebec certified a class proposed by plaintiffs. Plaintiffs are honey producers in Quebec claiming damages and punitive damages and alleging Bayer and another crop protection company were negligent in the design, development, marketing and sale of neonicotinoid pesticides. Patent disputes Betaferon™ / Betaseron™: Since 2010, Bayer and Biogen Idec MA Inc. (“Biogen”) have been engaged in a dispute in the United States about the validity of a patent issued to Biogen and whether Bayer’s production and distribution of Betaseron™ would infringe such patent. Betaseron™ is Bayer’s drug product for the treatment of multiple sclerosis. In February 2018, a jury decided that Biogen’s patent is invalid at the end of a trial regarding Biogen’s claims against EMD Serono, Inc. (“Serono”) and Pfizer Inc. (“Pfizer”) for infringement of the same patent. In September 2018, the court overturned the jury decision and granted judgment in favor of Biogen. Serono and Pfizer appealed. The trial of Biogen’s claim against Bayer has not yet been scheduled. Damoctocog alfa pegol (Jivi™, BAY 94-9027, long-acting recombinant factor VIII): In August 2018, Nektar Therapeutics (“Nektar”), Baxalta Incorporated and Baxalta U.S., Inc. (together “Baxalta”) filed another complaint in a U.S. federal court against Bayer alleging that BAY 94-9027, approved as Jivi™ in the United States for the treatment of hemophilia, infringes five patents by Nektar. The five patents are part of a patent family registered in the name of Nektar and further comprising a European patent application with the title “Branched polymers and their conjugates”. This patent family is different from the one at issue in the patent disputes already pending in the United States and Germany. In October 2018, Bayer filed a lawsuit in the administrative court of Munich, Germany, claiming rights to the European patent application based on a past collaboration between Bayer and Nektar in the field of hemophilia. Bayer believes it has meritorious defenses and intends to defend itself vigorously. Stivarga™: In 2016, Bayer filed patent infringement lawsuits in a U.S. federal court against Apotex and against Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries Ltd. (together “Teva”). 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. In October 2018, Bayer and Teva reached agreement to settle their patent dispute. Under the settlement terms, Teva will obtain a license to sell its generic version of Stivarga™ in the United States at a date shortly before the expiration of the patent protection for the active ingredient. Xarelto™: In 2015, Bayer and Janssen Pharmaceuticals filed a patent infringement lawsuit in a U.S. federal court against Mylan Pharmaceuticals Inc. (“Mylan”), Prinston Pharmaceutical Inc. (“Prinston“), Sigmapharm Laboratories, LLC (“Sigmapharm”) and further defendants. Bayer had received notices of an ANDA IV application by Mylan, Sigmapharm and the other defendants, 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 July 2018, the court ordered that Bayer’s compound patent protection for Xarelto™ until 2024 is valid and that the patent is infringed. The decision is final. Further Legal Proceedings 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. 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 July 2018, Occidental Chemical Company, one of the parties potentially liable for cleanup costs in the Lower Passaic River, filed a lawsuit in New Jersey federal court seeking contribution and cost recovery from dozens of other potentially responsible parties, including a Bayer subsidiary, for past and future cleanup costs. Bayer is currently unable to determine the extent of its liability in this matter. One A Day™ vitamins: Bayer has been named in a class action lawsuit in the United States alleging Bayer’s claims on its One A Day™ vitamins regarding the support of heart health, immunity and physical energy are false and misleading. The class is defined as California, Florida and New York residents who purchased One A Day™ products with the claims at issue. In September 2018, plaintiffs asserted through the filing of an expert report their alleged potential damages. Bayer’s challenge of the class certification is currently pending in the Court of Appeals for the Ninth Circuit. Bayer believes it has meritorious defenses and intends to defend itself vigorously. Monsanto Legal Risks In June 2018, Bayer became the sole shareholder of Monsanto Company, St. Louis, USA (“Monsanto”). Bayer considers the following legal proceedings of Monsanto to involve risks that are material for the Bayer Group. The legal proceedings referred to do not represent an exhaustive list. PCB: Monsanto has been named in lawsuits brought by various governmental entities in the United States claiming that Monsanto, Pharmacia and Solutia, collectively as a manufacturer of PCBs, should be responsible for a variety of damages due to PCBs in bodies of water, regardless of how PCBs came to be located there. PCBs are man-made chemicals that were widely used for various purposes until prohibited by the Environmental Protection Agency (EPA) in the United States in 1979. We believe that we have meritorious defenses and intend to defend ourselves vigorously. Roundup™ (Glyphosate): As of October 30, 2018, lawsuits from approximately 9,300 plaintiffs claiming to have been exposed to glyphosate-based products manufactured by Monsanto had been served upon Monsanto in the United States. Glyphosate is the active ingredient contained in certain of Monsanto’s herbicides, including Roundup™-branded products. Plaintiffs allege personal injuries resulting from exposure to those products, including non-Hodgkin lymphoma (NHL) and multiple myeloma, and seek compensatory and punitive damages. Plaintiffs claim, inter alia, that Monsanto’s glyphosate-based herbicide products are defective and that Monsanto knew, or should have known, of the risks allegedly associated with such products and failed to adequately warn its users. Additional lawsuits are anticipated. The majority of plaintiffs have brought actions in state courts in Missouri, Delaware and California, while the remainder of plaintiffs’ cases were filed in many different federal courts. In 2016, the Judicial Panel on Multi-District Litigation transferred to the Northern District of California all of the federal cases for pretrial purposes. In August 2018, a state court jury in San Francisco, California, awarded roughly USD 39 million in compensatory and USD 250 million in punitive damages to a plaintiff who claimed that a Monsanto product caused his NHL. We disagree with the verdict and sought trial court review in September 2018. In October 2018, the trial judge decided to reduce the punitive damages from USD 250 million to roughly USD 39 million. The roughly USD 39 million compensatory damages were not reduced. The decision to reduce the punitive damage award by more than USD 200 million is a step in the right direction, but we plan to file an appeal with the California Court of Appeal. In view of more than 800 scientific studies and regulatory authorities all over the world confirming that glyphosate is safe for use when used according to label instructions, including an independent study which followed more than 50,000 licensed pesticide applicators and farm workers and their spouses for more than 20 years which found no association between glyphosate-based herbicides and cancer, and the U.S. Environmental Protection Agency’s 2018 risk assessment which examined more than 100 studies and concluded that glyphosate is “not likely to be carcinogenic to humans,” we continue to believe that we have meritorious defenses and intend to defend ourselves vigorously in all of these lawsuits. In connection with the above-mentioned Monsanto proceedings, Monsanto is insured against statutory product liability claims against Monsanto to the extent customary in the respective industries and has, based on the information currently available, taken appropriate accounting measures for anticipated defense costs.