Unlock Editor’s Digest for free
Roula Khalaf, editor-in-chief of the FT, selects her favorite stories in this weekly newsletter.
Philips has stopped sales of its sleep apnea devices in the United States after reaching a settlement with local authorities, following the recall of millions of devices over the past three years.
The Dutch manufacturer announced on Monday that it was setting aside 363 million euros in the fourth quarter to resolve long-standing problems with its breathing devices, following an agreement with the US Department of Justice, acting on behalf of the Food and Drug Administration.
The agreement, called a consent decree, caps a year-long saga after Philips began recalling some machines in 2021 due to potential health risks caused by the disintegration of sound-deadening foam inside them. this.
The issue affected 15 million devices worldwide. THE The FDA said people using the devices could breathe or swallow the foam if it decomposes, or inhale invisible chemicals. Philips said it plans to recall up to 5.6 million machines, with some devices no longer in use.
Until the terms of the multi-year agreement are met, Philips’ Respironics unit will not sell any new sleep apnea devices in the United States, but will be allowed to sell parts and service the devices existing.
Analysts at Jefferies said U.S. sales recovery would “likely take years.”
The deal comes after Philips said last year it anticipated more than $600 million in legal costs in the United States resulting from millions of potentially defective medical devices, and had set aside $575 million. euros to resolve a class action brought after the 2021 recall. Added to this are the 204 million euros in costs linked to job cuts and problems with the machines.
Shares of Philips opened 5 percent lower on Monday and are about 60 percent off their 2021 high.
“Addressing the consequences of the Respironics recall for our patients and customers is a key focus area and I recognize and apologize for the distress and concern caused,” chief executive Roy Jakobs said on Monday. “We are fully committed to complying with the consent decree, which is an important step and provides a clear path forward,” he added.
The company said the U.S. deal would “provide Philips Respironics with a roadmap of defined actions, milestones and deliverables to demonstrate compliance with regulatory requirements and restore business.”
Philips revealed its settlement with US authorities as it reported fourth-quarter results, with sales down 7 percent year-on-year, including the impact of its Respironics business. It recorded 653 million euros in adjusted earnings before interest, taxes, depreciation and amortization, in line with the previous year but below analysts’ expectations.
Philips said it remained confident in achieving its 2023-2025 plan, although uncertainties remained. For 2024, it forecasts comparable sales growth, excluding Respironics activities, of between 3 and 5 percent.
The degree of consent was subject to approval by the relevant US court, Philips said.